The major indexes opened higher on the last trading day of the quarter as some investors remain on the sidelines due to the Deutsche Bank uncertainty. Although many believe the German government will rescue the bank if it had to, the political price of doing so could be so great that politicians might think twice before biting the bullet. The backstop uncertainty plus the increasingly connected nature of the financial system adds more risk at a time when equity valuations aren’t exactly screaming cheap.
In this article, we examine why five stocks, Royal Bank of Scotland Group PLC (NYSE:RBS), Cheniere Energy, Inc. (NYSEMKT:LNG), Cheniere Energy Partners LP Holdings LLC (NYSEMKT:CQH), Ophthotech Corp (NASDAQ:OPHT), and Regeneron Pharmaceuticals Inc (NASDAQ:REGN) are on investors’ radars today. We also find out what the smart money investors from our database think about the companies in question.
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).
Royal Bank of Scotland Group PLC (NYSE:RBS) is trending after Reuters reported that the bank plans to separate its higher-risk businesses from its safer retail operations to meet Britain’s new ring-fencing rules. Britain implemented the ring-fencing rules to prevent bad bets from threatening normal deposit accounts, which can in turn lead to big bailouts that occurred in 2008. Royal Bank of Scotland Group PLC (NYSE:RBS) shares haven’t done well in 2016, as they are down by around 50% year-to-date (with the Brexit and recent Deutsche Bank uncertainty playing big roles). Jim Simons’ Renaissance Technologies bumped up its holdings in Royal Bank of Scotland Group PLC (NYSE:RBS) by 46% in the second quarter to over 1.8 million shares held at the end of June.
Traders are buzzing about two energy companies after Cheniere Energy, Inc. (NYSEMKT:LNG) offered to buy Cheniere Energy Partners LP Holdings LLC (NYSEMKT:CQH) for 0.5049 Cheniere shares for each outstanding publicly-held share of Cheniere Partners Holdings. That represents a value of $21.9 per share based on the closing prices of the companies on Thursday. Cheniere already owns 80.1% of Cheniere Energy Partners LP Holdings. According to our database of 749 funds, the smart money was very bullish on Cheniere Energy, Inc. (NYSEMKT:LNG), as 42 investors amassed over half of the company’s float on June 30. Meanwhile, just 13 funds held 8.9% of Cheniere Energy Partners LP Holdings LLC (NYSEMKT:CQH)’s float at the end of the second quarter.
On the next page, we find out why traders are watching Ophthotech Corp, and Regeneron Pharmaceuticals.