Why Tesla, Chesapeake, and 3 Other Companies Are in the Spotlight Today

With the markets sitting below all-time highs, volatility among the indexes is almost non-existent. The VIX fear index is at a meager 12.51 and the bulls are unafraid of the various downside macro-risks, including a Chinese slowdown or the ramifications of the Brexit.

Among the stocks capturing investor interest today are Tesla Motors Inc (NASDAQ:TSLA), PDC Energy Inc (NASDAQ:PDCE), Lantheus Holdings Inc (NASDAQ:LNTH), Investors Real Estate Trust (NYSE:IRET), and Chesapeake Energy Corporation (NYSE:CHK). Let’s examine why each company is trending and use the latest regulatory filings to see how the smart money has positioned the five in their portfolios.

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).

Traders are talking about Tesla Motors Inc (NASDAQ:TSLA) today after the company said that its autopilot feature wasn’t being used when a Tesla owner fatally crashed into a tree near Amsterdam this week. Although Tesla’s cars are some of the safest available on the market, the vehicle was traveling at speeds of more than 155 kph (96 mph) when it struck the tree, which would make survival in any vehicle unlikely. Tesla caught substantial criticism for the death of a Model S driver in May who was using the autopilot feature at the time of the crash. Although critics have blamed Tesla for being too aggressive in adopting new autonomous technology features, Tesla’s founder, Elon Musk, has ardently defended the technology, saying that it saves more lives on balance. Given that the company has said that it might need to raise more capital this year, it is important for Tesla to maintain positive market sentiment in its stock in the near-term and not have any autopilot-related accidents. Of the 749 hedge funds that we track which filed 13F’s for the June quarter, 36 had a long position in Tesla Motors Inc (NASDAQ:TSLA) at the end of June.

With the markets now more open to expansionary capital financing for E&P’s, PDC Energy Inc (NASDAQ:PDCE) is cashing in on the conditions by announcing public offerings of common stock of 6.5 million shares and convertible senior notes of $100 million in aggregate principal due 2021. As is customary, PDC Energy has given the underwriters of the equity offering an option to buy more shares (975,000) for 30 days and the underwriters of the senior notes the option to buy $15 million in additional notes for 30 days. PDC intends to use the net proceeds to fund a portion of its previous acquisition of some acreage in the Permian and for general corporate purposes. The pricing of the offering was not disclosed in the initial press release. 17 funds that we track were bullish on PDC Energy Inc (NASDAQ:PDCE) at the end of the second quarter, down by seven funds from the previous quarter’s end.

On the next page we’ll find out why Lantheus Holdings, Investors Real Estate Trust, and Chesapeake Energy are each trending this morning.

Lantheus Holdings Inc (NASDAQ:LNTH) shares are down by nearly 13% this morning after the company announced that it will issue 5.2 million shares of common stock in a secondary offering, the pricing of which was not published during the initial press release. Lantheus Holdings intends to use the proceeds raised, along with some cash on hand, to pay down around $55 million of outstanding principal balance under a current senior secured credit facility. The number of successful funds  in our system with holdings in Lantheus Holdings Inc (NASDAQ:LNTH) rose by two quarter-over-quarter to four at the end of June.

Investors Real Estate Trust (NYSE:IRET) is trending after the REIT reported in-line FFO of $0.12 per share for the first quarter of its fiscal year 2017. Revenue for the period was $49.6 million, down by 2.7% year-over-year, but $0.88 million better than estimates. Same-store multifamily NOI grew by 1.1% year-over-year during the period when excluding energy impacted markets, and the company announced the execution of sales agreements to dispose of 26 senior housing assets for $236 million. In terms of guidance, management continues to expect FFO in the range of $0.48 to $0.54 per share for the fiscal year ending April 30, 2017. The company currently pays an annual dividend of $0.52 per share. Nine funds in our database were long Investors Real Estate Trust (NYSE:IRET) as of the most recent 13F reporting period.

After having broken out of a technical range a few days ago, Chesapeake Energy Corporation (NYSE:CHK) is attracting a lot of attention due to the stock’s relative strength. Not only is WTI considerably higher after the EIA reported a draw-down of 14.5 million barrels last week, but Chesapeake also provided relatively-upbeat guidance for the coming years at a presentation at the Barclays CEO Energy-Power Conference yesterday. According to the data presented, Chesapeake will try to execute another $900 million in asset sales after selling $1.1 billion thus far. With the capital raised, Chesapeake is hoping to reduce its debt by $2 billion-to-$3 billion. Although it is selling assets, management is nevertheless guiding for between 5% and 15% annual production growth through 2020. Chesapeake also hopes to be cash-flow neutral by 2018, although that event could happen sooner if WTI and natural gas prices spike. Carl Icahn‘s Icahn Capital owned over 73 million shares of Chesapeake Energy Corporation (NYSE:CHK) at the end of June.

Disclosure: None