Markets are tumbling on Monday, with all major U.S. indexes, oil and gold trading slightly down. However, a few stocks are registering significant moves; among them we can count Smith & Wesson Holding Corp (NASDAQ:SWHC), Sturm, Ruger & Company (NYSE:RGR), Zafgen Inc (NASDAQ:ZFGN), Edwards Lifesciences Corp (NYSE:EW) and PulteGroup, Inc. (NYSE:PHM). So, let’s take a look into the events behind these big fluctuations, and into what the funds in our database think about the companies involved.
Our research determined that following the small-cap stocks that hedge funds are collectively bullish on can help a smaller investor beat the S&P 500 by around 95 basis points per month (see more details here).
Let’s start with Smith & Wesson Holding Corp (NASDAQ:SWHC), whose stock has dropped by 16% on Monday, after Cowen, CL King and BB&T Capital Markets downgraded the stock. The demotions were prompted by the release of National Instant Criminal Background Check System (NICS) data for March; while firearm background checks, which are an important indicator of gun purchases, were up by 16.7% year-over-year, they were down 13.2% month-over-month – marking the largest tumble in 10 years. Cowen seemed to be the first one to issue a downgrade to ‘Market Perform’ from ‘Outperform’. BB&T and CL King followed suit, trimming their scores to ‘Hold’ and ‘Neutral’, respectively, from ‘Buy’.
Also down by near 10% on the NICS data are shares of Sturm, Ruger & Company (NYSE:RGR), as well as retailers that sell guns, Sportsman’s Warehouse Holdings Inc (NASDAQ:SPWH) and Cabelas Inc (NYSE:CAB), whose stocks slid by 3% and 0.8%, correspondingly.
Among the hedge funds that we track, 27 were long Smith & Wesson Holding Corp (NASDAQ:SWHC) by the end of the fourth quarter, and 14 were long Sturm, Ruger & Company (NYSE:RGR). Among the most bullish firms was Jim Simons’ Renaissance Technologies; the fund last disclosed ownership of 872,076 shares of the former company, following a 68% increase in its stake, and ownership of 186,600 shares of the latter, following a 294% boost in its exposure.