Wall Street is rising on Wednesday with all three major indexes trading in the green and shares of Freeport-McMoRan Inc (NYSE:FCX), ArcelorMittal SA (ADR) (NYSE:MT), Celgene Corporation (NASDAQ:CELG), BP plc (ADR) (NYSE:BP), and Denbury Resources Inc. (NYSE:DNR) are gaining ground. In this article, we are going to take a look at why these stocks are trading higher. We are also going to assess the hedge fund sentiment towards these stocks.
We pay attention to hedge funds’ moves because our research has shown that hedge funds are extremely talented at picking stocks on the long side of their portfolios. It is true that hedge fund investors have been underperforming the market in recent years. However, this was mainly because hedge funds’ short stock picks lost a ton of money during the bull market that started in March 2009. Hedge fund investors also paid an arm and a leg for the services that they received. We have been tracking the performance of hedge funds’ 15 most popular small-cap stock picks in real time since the end of August 2012. These stocks have returned 102% since then and outperformed the S&P 500 Index by around 53 percentage points (see more details here). That’s why we believe it is important to pay attention to the hedge fund sentiment; we also don’t like paying huge fees.
The first on the list is Freeport-McMoRan Inc (NYSE:FCX), whose shares are up by almost 10% today continuing an upward trend that began on December 18, with the stock trading higher. Despite having no specific news linked to today’s movement, the stock was probably dragged higher by a rally in commodity prices on the back of strong GDP data for the third quarter reported yesterday. As we analyzed in a previous article, the company has recently suspended its dividend and cut its investment plans.
Our data show that the smart money is optimistic about the company, with the number of funds long Freeport-McMoRan Inc (NYSE:FCX) having increased by four to 44 during the third quarter. Together they hold some 13.8% of the company’s common stock while Carl Icahn’s Icahn Capital is the largest shareholder, owning 100 million shares valued at $969.0 million as of the end of September.
Moving on, ArcelorMittal SA (ADR) (NYSE:MT)’s shares have appreciated by 9% after the news that the United States Department of Commerce plans to begin to tax imports of corrosion-resistant steel from China. The tax is estimated to amount to 256% and seeks to benefit U.S. steelmakers.
Among the funds we follow, 18 reported long positions in ArcelorMittal as of the end of September, down by four funds from a quarter earlier. David Costen Haley’s HBK Investments is the largest shareholder of the company among the investors we follow, owning 6.55 million shares valued at $54.2 million; the fund upped its stake by 31% during the third quarter.
Next on our list of morning gainers is Celgene Corporation (NASDAQ:CELG), whose shares are up by 8% after the analysts at Cantor Fitzgerald and William Blair reiterated their ‘Buy’ and ‘Outperform’ ratings, respectively. Moreover, the jump follows positive news on Revlimid that the sale of the product will be allowed for one year before patents covering the drug expire (April 2027).
Among the funds we track, Celgene Corporation (NASDAQ:CELG) gained some popularity during the third quarter, with a total of 62 funds reporting long positions in the company, versus 58 funds a quarter earlier. However, these funds amassed 2.4% of the company’s outstanding stock heading into the fourth quarter. Samuel Isaly‘s Orbimed Advisors reported owning 3.59 million shares of Celgene Corporation, valued at $388.7 million in its latest 13F filing.
Finally, several companies are dragged up by the rise in oil on the back of a 5.9 million-barrel drop in the US crude inventories in the last week that was disclosed by the Energy Information Administration earlier today. Shares of BP plc (ADR) (NYSE:BP) are up by 4% as investors become more optimistic on the company after the oil market is moving upward.
Our data shows that hedge funds are bullish on the firm, with 35 hedge funds owning $968.2 million worth of BP plc shares as of the end of the third quarter. Among the bulls is Richard S. Pzena‘s Pzena Investment Management, holding a stake of 9.74 million shares.
Denbury Resources Inc. (NYSE:DNR) is another oil & gas company whose stock has surged by some 17%. Hedge funds have been more optimistic about the stock recently, with 19 hedge funds long Denbury Resources Inc. (NYSE:DNR) at the end of the third quarter, up from the 17 funds at the end of June. Together, they amass 8.10% of the company’s outstanding stock. Ron Gutfleish’s Elm Ridge Capital holds the biggest position with 6.47 million shares, valued at $15.8 million at the end of September, and comprising 2.3% of its 13F portfolio.