Why Are These Four Stocks Surging on Friday?

With the broader market in the red, shares of YRC Worldwide Inc (NASDAQ:YRCW), Columbia Sportswear Company (NASDAQ:COLM), Trimble Navigation Limited (NASDAQ:TRMB), and Imperva Inc (NYSE:IMPV) are making strong bull moves. Let’s find out why traders are so optimistic today and see if hedge funds agree with them.

But why do we track hedge fund activity? From one point of view we can argue that hedge funds are consistently underperforming when it comes to net returns over the last three years, when compared to the S&P 500. But that doesn’t mean that we should completely neglect their activity. There are various reasons behind the low hedge fund returns. Our research indicated that hedge funds’ long positions actually beat the market. In our back-tests covering the 1999-2012 period hedge funds’ top small-cap stocks edged the S&P 500 index by double digits annually. The 15 most popular small-cap stock picks among hedge funds also bested passive index funds by around 53 percentage points over the 36 month period beginning from September 2012 (see more details here).

YRC Worldwide Inc (NASDAQ:YRCW) is up a stunning 23.47% after the trucking company reported third-quarter earnings of $0.61 per share on revenues of $1.25 billion (down by 5.3% year-over-year), beating profit estimates by $0.18 per share and meeting revenue estimates. Earnings beat analyst estimates because management is doing a good job putting pricing improvements and profitability ahead of tonnage growth. Excluding the fuel surcharge, revenue per shipment rose 7% year-over-year at YRC Freight while tonnage per day dropped 6.2% at the unit. If this continues, the stock will be a good holding, although management will need to do a good job managing trucking cost as the economy moves closer to full employment. A total of 18 funds of the 730 we track reported stakes worth $232.41 million (representing 54.70% of the float) as of the end of June, with Marc Lasry‘s Avenue Capital owning 7.27 million shares at the end of the second quarter.

Columbia Sportswear Company (NASDAQ:COLM) has advanced by 2.42% after reporting third-quarter EPS of $1.28 on revenues of $767.6 million (up 13.7% year-over-year), beating estimates by $0.19 and $28.87 million, respectively. Gross margin increased by 1.0 percentage point to 46.4% and the board approved a 13% increase in the dividend to $0.17 per share. Guidance is pretty much in-line, with the company expecting 2015 revenue of $2.3 billion and EPS in the range of $2.32 and $2.37, versus expectations of $2.34 billion and $2.35 per share, respectively. Although the strong dollar is having a negative effect on Columbia Sportswear Company’s international sales, the robust U.S. economy is boosting the company’s domestic sales. Shares can continue to do well as long as the U.S. economy continues to improve. Hedge funds are ambivalent on the company, however, as only 15 funds of the around 730 we track reported stakes worth $134.7 million (representing 3.20% of the float) held at the end of June.

On the next page, we examine why Trimble Navigation Limited and Imperva are rallying.
Trimble Navigation Limited (NASDAQ:TRMB) shares jumped by 20% in late morning trading after the company reported third quarter earnings of $0.30 per share on revenues of $562.3 million (down by 3.8% year-over-year), beating estimates by $0.07 per share and $16.43 million, respectively. Gross margin fell by 0.4 percentage points year-over-year to 57.4%, while operating expenses fell even further by approximately 1% year-over-year to $217.7 million. For the fourth quarter, the company projects EPS in the range of $0.19 to $0.26 and revenue between $520 million and $550 million, versus analyst expectations of $0.25 and $557.4 million, respectively. Shares were at one point down by almost 40% year-to-date as low commodity and energy prices weighted in, but are now down by just 15% lower year-to-date because of today’s rally. Among the funds we track, during the second quarter, the number of funds long Trimble Navigation decreased to 18 from 20, but the total value of their holdings in the stock increased to $293.92 million (representing 4.80% of the float) from $249.64 million.

Imperva Inc (NYSE:IMPV) is up by 18.34% after reporting third-quarter earnings of $0.19 per share on revenues of $63.35 million (up 48.4% year-over-year), beating estimates by $0.24 per share and $6.85 million, respectively. Combined subscription and product revenue rose 64% year-over-year, while total deferred revenue (as of September 30) jumped by 32% year-over-year to $91.3 million. Guidance is solid, with management expecting fourth-quarter revenue between $66 million and $68 million and non-GAAP adjusted EPS of $0.10-$0.16 versus expectations of $62.25 million and a loss of $0.06 per share. A total of 23 funds held stakes worth $176.5 million (accounting for 8.50% of the shares) at the end of June, up from 21 funds and $120.72 million at the end of March.

Disclosure: none