The S&P 500 is flat this morning and the NASDAQ is off by 0.1%, but that hasn’t stopped shares of Whiting Petroleum Corp (NYSE:WLL), RingCentral Inc (NYSE:RNG), Unit Corporation (NYSE:UNT), and Sanmina Corp (NASDAQ:SANM) from enjoying big rallies, as investors pile into the stocks on the back of various news. Let’s find out why investors are buying and see what hedge funds think of each company.
Whiting Petroleum Corp (NYSE:WLL) is up by 8.23% in morning trading because WTI crude contracts are up by 2.15% to $47.13 per barrel. Although the crude market is oversupplied and Saudi Arabia is manipulating prices lower by increasing production, crude demand is still healthy. Given the stabilizing Shanghai index, Chinese oil demand could be better than expected, particularly as Chinese President Xi Jinping recently set a goal of 6.5% annual GDP growth over the next five years. Given the company deleveraged its balance sheet, Whiting should have enough cash and credit to weather the storm. Management is also cutting costs, with the goal of being cash flow neutral by 2016. Of the 730 elite investment firms that we track, 53 of them were long Whiting on June 30, owning $2.17 billion worth of the company’s shares, 31.70% of the float. John Paulson‘s Paulson & Co owned 12.42 million Whiting Petroleum Corp (NYSE:WLL) shares at the end of the second quarter.
Most investors don’t understand hedge funds and indicators that are based on hedge funds’ activities. They ignore hedge funds because of their recent poor performance in the bull market. Our research indicates that hedge funds underperformed because they aren’t 100% long. Hedge fund fees are also very large compared to the returns generated and they reduce the net returns experienced by investors. We uncovered that hedge funds’ long positions actually outperformed the market. For instance the 15 most popular small-cap stocks among funds beat the S&P 500 Index by more than 53 percentage points since the end of August 2012. These stocks returned a cumulative of 102% vs. a 48.7% gain for the S&P 500 Index (see the details here). That’s why we believe investors should pay attention to what hedge funds are buying (rather than what their net returns are).
RingCentral Inc (NYSE:RNG) shares have surged by 6.9% today after the company reported third quarter revenues of $76.78 million, up 34.8% year-over-year, and earnings that broke even. Those figures beat estimates by $0.04 per share in earnings and $2.05 million in revenues. Total annualized exit monthly recurring subscriptions rose by 35% year-over-year to $297.5 million, while non-GAAP gross margins jumped by 4.4 percentage points to 76.5% year-over-year. RingCentral Inc (NYSE:RNG) also won a contract from Columbia University to be the college’s unified cloud provider so that students and faculty can communicate and collaborate across diverse devices and platforms. 22 funds owned $143.01 million worth of the company’s shares on June 30, amounting to 11.20% of the float, with Bain Capital‘s Brookside Capital holding a stake of 2.43 million shares.
On the next page, we examine why Unit Corporation and Sanmina Corp are surging.