The stock market continues to descend as companies release third-quarter financial results and update investors on their business operations. By midday, the Dow Jones Industrial Average was down 0.29% to 17,865.34, and the S&P 500 was down 0.36% to 2,102.12. In the Intraday trading four stocks are losing ground on the back of their third-quarter results and we are going to take a closer look at what sent these stocks lower today and what is the general sentiment among the funds we track towards these stocks.
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But why are we interested in the hedge fund sentiment at all? 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 50 percentage points over the 38 month period beginning from September 2012 (read more details here).
Groupon Inc (NASDAQ:GRPN) saw its shares decline midday by 30.52% with more than 32 million shares traded on Wednesday, November 4, after news of the exit of Eric Lefkofsky as CEO and his replacement by Rich Williams, currently the current COO and President of the company’s North America operations. Lefkofsky, who is also co-founder of Groupon Inc (NASDAQ:GRPN), was in his position since August 2013. Lefkofsky will serve as chairman of the board, effective immediately. While Lefkofsky was with the company, Groupon’s revenue grew 32% from $2.3 billion in 2012 to $3.1 billion in 2015, on a trailing-12-month basis, while adjusted EBITDA and fee cash flow stabilized.
Groupon Inc (NASDAQ:GRPN) also released its third-quarter 2015 financial results with gross billings declining 2% globally, but growing 6% excluding the unfavorable impact from year-over-year changes in foreign exchange rates throughout the quarter. The report stated gross billings of $1.47 billion in the third quarter of 2015, compared to $1.49 billion in the prior-year period. Adjusted EBITDA also rolled down to $56.3 million in the third quarter 2015, compared to $63.9 million a year earlier. Meanwhile, gross profit was lower at $328.9 million in the third quarter 2015, compared to $355.3 million in the year-ago period. Among the funds from our database, 34 investors reported stakes equal to 6.50% of the company as of the end of June.
United States Steel Corporation (NYSE:X) weakened by 13.54% in light trading, after Deutsche Bank downgraded its investment rating of the company to “buy” from “hold” amid the third-quarter 2015 earnings report and a flat dividend. United States Steel Corporation (NYSE:X) reported a narrower net loss of $173 million, or a loss of $1.18 per share for the third quarter of 2015, compared to a net loss of $261 million, or a loss of $1.79 per share in the prior-year period. Net sales of the Pittsburgh, Pa.-based company were marked lower in the third quarter of 2015 at $2.83 billion, from the $2.90 billion reported in the prior-year period. Meanwhile, net loss attributable to United States Steel Corporation (NYSE:X) stockholders was $1.18 in the third quarter of 2015, compared to $1.79 a year earlier. A total of 29 funds from our database held nearly 16% of the company’s outstanding stock at the end of June.
On the next page, we are going to discuss what drove the performance of Etsy Inc (NASDAQ:ETSY) and Herbalife Ltd. (NYSE:HLF).
