All eyes are on the tech sector after President Trump escalated the trade war with China by putting Chinese crown jewel Huawei on a blacklist. Predictably, many tech names fell hard on the day and the market sold off. There is nevertheless other news besides the tariff battle, and we’re here to cover it. Let’s analyze why five companies, Chevron Corporation (NYSE:CVX), Sprint Corporation (NYSE:S), T-Mobile US, Inc. (NYSE:TMUS), SolarWinds Inc (NYSE:SWI), and Ocular Therapeutix Inc (NASDAQ:OCUL) are each in the spotlight and how the smart money is positioned among the stocks.
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.
Although it isn’t a big move and won’t help its bottom line any time soon, Chevron Corporation (NYSE:CVX) diversified itself a little by offering EV charging at five of its gasoline stations in the state of California in conjunction with its partnership with EVgo. Although the emergence of electric vehicles are bad for Chevron’s core existing petroleum business, big energy will eventually need to adjust to the future with electric vehicles and offering EV charging is one way to do it. 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.
Sprint Corporation (NYSE:S) and T-Mobile US, Inc. (NYSE:TMUS) are on watch after Bloomberg reported on Monday that the Department of Justice is leaning against granting approval of the merger between the two. Both the DOJ and the FCC will need to approve the deal. Of the two, it seems the latter is more open to the combination; FCC Chariman Ajit Pai recently said, “In light of the significant commitments made by T-Mobile and Sprint as well as the facts in the record to date, I believe that this transaction is in the public interest and intend to recommend to my colleagues that the FCC approve it.” The deal could still go through if the two companies make sufficient concessions, however.
If the funds we track, 24 top funds had a bullish position in Sprint Corporation (NYSE:S) and 75 elite funds were long T-Mobile US, Inc. (NYSE:TMUS) at the end of December.
SolarWinds Inc (NYSE:SWI) shares fell around 5% in after hours on Monday after it announced a follow-on offering by selling stockholders. Specifically, there will be a commencement of an underwitten public offering of 15 million shares of common stock by certain selling stockholders and such selling stockholders intend to grand the underwriters a 30 day option to purchase an additional 2.25 million shares of SolarWinds common stock.
Ocular Therapeutix Inc (NASDAQ:OCUL) shares are down by around 9% in after hours on Monday after the company’s OTX-TP drug candidate failed to meet primary endpoint in a Phase 3 Clinical Trial of OTX-TP for the Treatment of Glaucoma. Nevertheless, the drug candidate did achieve ‘statistically significant reduction of intraocular pressure versus placebo at eight of the nine pre-specified time points’. OCUL plans to talk with the FDA to discuss next steps.