Shares of KLA-Tencor Corp (NASDAQ:KLAC), Applied Materials, Inc. (NASDAQ:AMAT), Tupperware Brands Corporation (NYSE:TUP), and Intuitive Surgical, Inc. (NASDAQ:ISRG) are surging for various reasons on Wednesday. Let’s analyze why.
First a little bit about us. Insider Monkey is a financial site that monitors smart money sentiment. We pay attention to hedge funds’ moves because our research has shown that hedge funds are extremely talented at picking stocks on the long side of their portfolios. It is true that hedge fund investors have been underperforming the market in recent years. However, this was mainly because hedge funds’ short stock picks lost a ton of money during the bull market that started in March 2009. Hedge fund investors also paid an arm and a leg for the services that they received. We have been tracking the performance of hedge funds’ 15 most popular small-cap stock picks in real time since the end of August 2012. These stocks have returned 102% since then and outperformed the S&P 500 Index by around 53 percentage points (see the details here). That’s why we believe it is important to pay attention to hedge fund sentiment; we also don’t like paying huge fees.
KLA-Tencor Corp (NASDAQ:KLAC) is up by 23.2% after the company announced Lam Research Corporation (NASDAQ:LRCX) will acquire it for $32 in cash per share and 0.5 shares of Lam Research for each share of KLA-Tenor. The transaction values KLA-Tencor Corp (NASDAQ:KLAC) at $67.02 per share based on the closing price of Lam Research on Tuesday. There have been a spate of technology mergers in recent quarters as the era of cheap debt comes to an end. Lam’s acquisition of KLA-Tenor is just the latest in a long line of deals that should consolidate the industry and reduce oversupply. Management estimates the deal will yield $250 million in annual cost savings within two years of the deal’s close. The deal could also give the combined company more pricing power over its customers.
Applied Materials, Inc. (NASDAQ:AMAT) inched up by 1% after Intel Corporation (NASDAQ:INTC) announced it will spend up to $5.5 billion on flash memory investments in China ‘over the coming years’. Applied Materials, Inc. (NASDAQ:AMAT) helps companies make the latest and greatest NAND flash technology and will likely garner a substantial part of Intel’s additional spending. Shares of the company haven’t done very well, down over 33% year-to-date, but trade at a forward P/E of 12.17. Of the around 730 elite funds we track, 65 funds owned $2.47 billion of the company’s shares (accounting for 10.50% of the float) on June 30, versus 81 funds and $4.36 billion on March 31. Larry Robbins‘ Glenview Capital held 21.28 million shares of the company at the end of June.
On the next page, we analyze why Tupperware and Intuitive Surgical are surging.