Why Investors Are Buzzing About Janus Capital, Deutsche Bank, Freeport-McMoRan, and More

On the first trading day of the new quarter, the Dow, S&P, and Nasdaq indexes have each opened moderately in the red, as profit-taking and uncertainty over the global economy takes hold.

In this article, we’ll take a closer look at why Janus Capital Group Inc (NYSE:JNS), Freeport-McMoRan Inc (NYSE:FCX), Marathon Oil Corporation (NYSE:MRO), Deutsche Bank AG (USA) (NYSE:DB), and Watsco Inc (NYSE:WSO) are each in the spotlight and dig deep into SEC filings to determine how some of the most successful investors were positioned among the five stocks at the end of the second quarter.

Through extensive research, we determined that imitating some of the picks of hedge funds and other institutional investors can help generate market-beating returns over the long run. The key is to focus on the small-cap picks of these investors, since they are usually less followed by the broader market and are less price-efficient. Our backtests that covered the period between 1999 and 2012, showed that following the 15 most popular small-caps among hedge funds can help a retail investor beat the market by an average of 95 basis points per month (see the details here).

Consolidation in the financial services industry is alive and well, as the Board of Directors of both Janus Capital Group Inc (NYSE:JNS) and Henderson Group plc have unanimously agreed to an all-stock merger of equals. The combined company will be named Janus Henderson Global Investors plc and will manage around $320 billion in assets, potentially giving star manager Bill Gross another opportunity to create a giant in the fixed income sector. According to the two firms, the combined company will aim for annual net cost synergies of $110 million or more following the first 12 months after the deal’s close (the companies expect the $110 million to be fully realized three years after completion). They also expect the synergies to deliver double-digit accretion to EPS in the first 12 months following the closing of the deal, which is expected in the second quarter of 2017. Not surprisingly, shares of Janus are 17% in the green in morning trading. John W. Rogers‘ Ariel Investments trimmed its stake in Janus Capital Group Inc (NYSE:JNS) by 3% during the second quarter, to just under 7.5 million shares at the end of June.

Freeport-McMoRan Inc (NYSE:FCX) shares are 2.7% in the green after Deutsche Bank bumped up its price target on the stock to $12.50 from $12 and upgraded its rating on it to ‘Buy’ from ‘Hold’. The analysts at the investment bank like how the company is getting its financial house in order and how a potential copper rebound could provide Freeport-McMoRan with further upside. Of the 749 hedge funds that we track which filed 13Fs for the June quarter, 30 funds owned $1.52 billion in Freeport-McMoRan Inc (NYSE:FCX) shares on June 30, which accounted for 10.90% of the float.

On the next page, we’ll take a closer look at why Marathon Oil Corporation, Deutsche Bank, and Watsco are making headlines today.

Marathon Oil Corporation (NYSE:MRO) is in the spotlight today after the company agreed to sell certain non-operated carbon dioxide and waterflood assets in New Mexico and West Texas for $235 million, excluding certain closing adjustments. Those assets produced around 4,000 BOE per day in the first half of 2016. With the agreement, Marathon Oil has announced or closed on non-core divestments of over $1.5 billion to further strengthen its balance sheet and improve its focus. The number of hedge funds in our database with holdings in Marathon Oil Corporation (NYSE:MRO) fell by seven during the second quarter to 26 at the end of June.

Many traders’ eyes are still glued on Deutsche Bank AG (USA) (NYSE:DB) today, as reports indicate that the bank hasn’t yet settled with the DOJ. Although the settlement talks have progressed, no deal has yet been presented to senior decision makers for approval according to the Wall Street Journal’s sources. That means Friday’s Agence France-Presse report that the two sides were closing in on a $5.4 billion settlement, which sent the investment bank’s shares sharply higher, could end up being way off. If the ultimate settlement amount is far larger than $5.4 billion, the markets could sell off hard due to worries over Deutsche Bank’s capital levels. If the settlement is reasonable, on the other hand, the stock could rally again. 15 funds that we track owned shares of Deutsche Bank AG (USA) (NYSE:DB) at the end of June, up by five funds from the end of March.

Watsco Inc (NYSE:WSO) shareholders are happy today after the company raised its quarterly dividend to $1.05 per share from the previous mark of $0.85. The 23.5% dividend payout bump gives the stock a forward yield of almost 3%, nearly two-times greater than the 10-year Treasury yield. Shares of Watsco are up by over 22% year-to-date. 20 of the hedge funds in our system were long Watsco Inc (NYSE:WSO) at the end of the second quarter, owning 2.60% of its float.

Disclosure: None