Shares of Clovis Oncology Inc (NASDAQ:CLVS), Conduent Incorporated (NYSE:CNDT), Edison International (NYSE:EIX), Chevron Corporation (NYSE:CVX), and Anadarko Petroleum Corporation (NYSE:APC) were all on the move on Friday as the S&P 500 closed above 2900. Some like Edison International (NYSE:EIX) and Anadarko soared, while others like Clovis fell. Given their moves, let’s find out why each stock rose and fell and how the smart money is positioned among them.
Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. 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.
Clovis Oncology Inc (NASDAQ:CLVS) shares are down around 14% in after hours on Friday after the company said in a Form 8-K that it
“is discontinuing its sponsored Phase 2 open-label monotherapy clinical trial evaluating rucaparib in recurrent, metastatic bladder cancer (CO-338-085 (“ATLAS”)). The decision is based on recommendations by an independent data monitoring committee (“DMC”) following its review of preliminary efficacy data for 62 patients enrolled and treated in the study, which demonstrated that the objective response rate in the intent-to-treat population does not meet the protocol-defined continuance criteria, and suggests that treatment with monotherapy rucaparib may not provide a meaningful clinical benefit to patients. Therefore, the DMC recommended to stop enrollment to the study, and Clovis has decided to terminate the ATLAS trial early.”
Of the around 700-740 elite funds we track, 24 funds owned $452.16 million of Clovis Oncology Inc (NASDAQ:CLVS) on December 31, versus 32 funds and $673.67 million respectively on September 30.
Conduent Incorporated (NYSE:CNDT) fell around 6% after the company revealed hedge fund manager Carl Icahn’s designee Michael Nevin had resigned from the company’s board on April 8. Nevin cited chairman Bill Parrett as ‘the main roadblock to meaningful change’. Apparently some investors didn’t like the board strife and headed for the exits. 35 elite funds were long Conduent Incorporated (NYSE:CNDT) as of the most recent 13-F reporting period.
Edison International (NYSE:EIX) shares are 7% in the green after Gavin Newsom, governor of California, released a series of proposals to address future wildfire liability costs. Some proposals include creating a potential wildfire fund to spread around costs related to fire damage lawsuits while another idea includes modifying the liability standard in California. California had experienced forest fires that led to the filing of bankruptcy for PG&E. 28 top funds owned shares of Edison International (NYSE:EIX) at the end of December, up 3 funds from the previous quarter.
Chevron Corporation (NYSE:CVX) shares fell 4.9% and Anadarko Petroleum Corporation (NYSE:APC) soared over 32% after Chevron agreed to buy mid sized Anadarko Petroleum for $33 billion, or around $65 per share. Because the deal only values Anadarko at 7.5x earnings versus previous deals that averaged around 8.9x earnings, some investors thought that Chevron got a ‘steal’ in buying Anadarko, which has attractive assets and whose operations could make a difference a company Chevron’s size. Although Anadarko received another offer from Occidental Petroleum which reportedly bid more than $70 per share versus Chevron’s around $65 per share, the board of Anadarko nevertheless took Chevron’s $65 in cash and stock deal because there was reportedly less potential complications with it.
48 top funds were long Chevron Corporation (NYSE:CVX) at the end of December, down 8 funds from the previous quarter. Meanwhile, 54 elite funds were long Anadarko Petroleum Corporation (NYSE:APC) at the end of the fourth quarter.