Chevron, Conduent, Flexion, and More: Stocks in the Spotlight

The spotlight is on Uber today as the company makes its stock market debut on Friday. Many investors look at Uber with interest due to its disruptive potential and the fact that the transportation sector is so big. While Uber is commanding the spotlight, traders are also talking about several other stocks including Conduent Incorporated (NYSE:CNDT)Chevron Corporation (NYSE:CVX)Anadarko Petroleum Corporation (NYSE:APC)Occidental Petroleum Corporation (NYSE:OXY), and Flexion Therapeutics Inc (NASDAQ:FLXN). Let’s take a look and analyze how elite funds are positioned among them.

Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the market by 32 percentage points since May 2014 through March 12, 2019 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.

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Chevron Corporation (NYSE:CVX) is in the green by around 3% today after the oil company bowed out of the bidding process for Anadarko Petroleum Corporation (NYSE:APC). Although the merger of Anadarko and Chevron could unlock substantial synergies, shareholders of Chevron like how the company won’t overpay to buy assets and Chevron will get a nice $1 billion breakup fee for its troubles. Meanwhile, shares of the winner of the Anadarko sweepstakes, Occidental Petroleum Corporation (NYSE:OXY), are down 5.3% as investors now look to management to execute to unlock the promised synergies of the deal. Of the around 700-740 elite funds we track, 48 funds owned $1.91 billion of Chevron Corporation (NYSE:CVX) on December 31, versus 56 funds and $3.01 billion respectively on September 30. 54 top funds were long Anadarko Petroleum Corporation (NYSE:APC) and 32 top funds were long Occidental Petroleum Corporation (NYSE:OXY) as of the most recent 13-F reporting period.

Conduent Incorporated (NYSE:CNDT) shares are down by around 24% after the company reported a worse than expected first quarter. Adjusted EPS was $0.14, missing by $0.02, while sales came in at $1.16 billion, down 18.3% year over year, and missing by $10 million. Adjusted EBITDA was $122 million, up 1.7%, while total signings TCV was $952 million. The company may have hurt sentiment after it announced that CEO Ashok Vemuri intends to step down. Vemuri will still be CEO until his successor is appointed, which is expected to occur in Q3. Of the around 700-740 elite funds we track, 35 funds owned $487.99 million of Conduent Incorporated (NYSE:CNDT) on December 31, versus 34 funds and $1.16 billion respectively on September 30.

Flexion Therapeutics Inc (NASDAQ:FLXN) shares are 17% in the green after the company reported strong sales of Zilretta, which brought in $10.6 million for Q1, up 381% year over year. April preliminary sales were around $5.1 million. In terms of guidance, management ‘remains confident’ they will achieve the company’s full year 2019 revenue target of $65-$80 million. CEO Michael Clayman added, “we believe we will ultimately see ZILRETTA become the leading branded intra-articular treatment for the millions of people who confront osteoarthritis knee pain.” Bernard Selz’s Selz Capital initiated a new position of 290,000 shares in Q1.