With just several days to go until November 8, many investors are firmly focused on the U.S. presidential election. Although most pundits believe Clinton is the odds-on favorite to win, the polls are tightening, and a Trump victory can’t be ruled out. Given their vastly different policy agendas, the market (and certain sectors within it) will react quite differently to a Trump victory than to a Clinton win.
Among the other things that investors are focused on this weekend is the latest news concerning BlackBerry Ltd (NASDAQ:BBRY), Apple Inc. (NASDAQ:AAPL), Memorial Production Partners LP (NASDAQ:MEMP), Tesla Motors Inc (NASDAQ:TSLA), and SolarCity Corp (NASDAQ:SCTY). Let’s find out why each stock is in the spotlight and see what the hedge funds in our system think of each.
At Insider Monkey we track over 750 hedge funds, whose quarterly 13F filings we analyze and determine their collective sentiment towards several thousand stocks. However, our research has shown that the best strategy is to follow hedge funds into their small-cap picks. This approach can allow monthly returns of nearly 95 basis points above the market, as we determined through extensive backtests covering the period between 1999 and 2012 (see the details).
Two tech companies are in the spotlight after Bloomberg published an article earlier this week entitled, ‘Apple Said to Develop Car Operating System in BlackBerry Country‘. On Friday, BlackBerry Ltd (NASDAQ:BBRY) COO Marty Beard responded to the story in a blog post, correcting multiple erroneous elements found in the story. Specifically, the Canadian tech executive didn’t like Bloomberg writing that Apple Inc. (NASDAQ:AAPL)‘s hiring moves hurt BlackBerry in terms of car software. Given that BlackBerry’s management has said that its QNX OS, which currently powers over 60 million cars, is a vital part of the company’s future, the company is especially quick to defend itself against any statements that might hurt that image.
“BlackBerry QNX has been a leading software system in automotive for more than 20 years,” Beard wrote. ‘You can find our software in 60 million vehicles from over 40 automotive OEMs such as Audi, Bentley, BMW, Buick, Chevrolet, Chrysler, Ford, GMC, Honda, Hyundai, Jaguar, Kia, Land Rover, Maserati, Mercedes-Benz, Porsche, Toyota, and Volkswagen. We’ve grown our team by 30% in the past two years… Ultimately, we find the reports on Apple’s alleged encroachment in Ottawa simply reinforces what we have always known: We have the best embedded software and security engineers in the world, and Canada is pretty great!”
Apple has reorganized its car efforts and is said to be focusing more on developing an autonomous platform rather than making a full ‘iCar’.
Jim Simons’ Renaissance Technologies raised its stake in BlackBerry Ltd (NASDAQ:BBRY) by 9% in the second quarter to 15.96 million shares at the end of June. Meanwhile, Warren Buffett‘s Berkshire Hathaway increased its holding in Apple Inc. (NASDAQ:AAPL) by 56% to 15.22 million shares during the same period.
Memorial Production Partners LP (NASDAQ:MEMP) shares fell sharply on Friday after the company announced that its Board has suspended the company’s quarterly cash payout to shareholders, effective immediately. The company also said that its borrowing base under a credit facility was reduced to $740 million from $925 million effective October 28. The borrowing base will be reduced again, to $720 million beginning December 1. As of October 28, Memorial Production Partners had around $714 million outstanding under its revolving credit facility. Furthermore, the company has initiated a process to explore strategic alternatives to improve its capital structure and balance sheet. None of the funds that we track owned shares of Memorial Production Partners LP (NASDAQ:MEMP) at the end of June.
On the next page we’ll examine why the spotlight is on the potential Tesla Motors and SolarCity merger.
It seems that Elon Musk is doing his utmost to show the benefits of a merger between Tesla Motors Inc (NASDAQ:TSLA) and SolarCity Corp (NASDAQ:SCTY) before shareholders vote on whether to approve or reject the combination. The tech entrepreneur showed off solar roofs with glass tiles that are more durable than normal roofing tiles on Friday, and that look more natural on roofs than existing solar panels. The solar roofs will be connected with the Powerwall 2 product and Tesla plans to install the roofs beginning next year.
Separately, David Einhorn intimated that he wasn’t too optimistic about Tesla in his third quarter investor letter, spotlighting a recent quote from NextDraft editor Dave Pell which said “It’s pretty amazing that we live in an age when a CEO of two public companies can give a talk about colonizing Mars and shareholders don’t see that as a warning signal.” Einhorn then added that “It’s not so amazing when one considers that those same complacent shareholders have been willing to look past years of over-promising and under-delivering from a promotional CEO.”
26 funds win our system owned SolarCity Corp (NASDAQ:SCTY) shares at the end of June, while 36 owners shares of Tesla Motors Inc (NASDAQ:TSLA).