Thursday’s market action seems like the polar opposite of Wednesday’s, as all three major indexes are well in the green versus yesterday’s tanking. Among the stocks on the move in today’s more optimistic market are Yamana Gold Inc. (USA) (NYSE:AUY), VirnetX Holding Corporation (NYSEMKT:VHC), CARBO Ceramics Inc. (NYSE:CRR), and Tower Semiconductor Ltd. (USA) (NASDAQ:TSEM). Let’s find out why there has been such furious trading action among these stocks and examine what the greatest investors in the world think about each of them.
While there are many metrics that investors can assess in the investment process, the hedge fund sentiment is something that is often overlooked. However, hedge funds and other institutional investors allocate significant resources while making their bets and their long-term focus makes them the perfect investors to emulate. This is supported by our research, which determined that following the small-cap stocks that hedge funds are collectively bullish on can help a smaller investor to beat the S&P 500 by around 95 basis points per month (see the details here).
Yamana Gold Inc. (USA) (NYSE:AUY) is 10% lower today after the gold producer hinted that it will cut its dividend, calling its current dividend payout too high. The producer said the following in a press release:
“The Company is committed to paying a dividend at a level considered as a baseline, and to periodically evaluate that level and dividend payout, relying in particular, on special dividends and share buybacks, as appropriate, when circumstances suggest more market stability and increasing available cash. The Company believes that cash balances will increase through the guidance period and in 2018 particularly when Cerro Moro is in operation. The revised baseline level is now $0.02 per share annually beginning with the declaration and payment of the first quarter 2016 dividend.”
If Yamana Gold Inc. (USA) (NYSE:AUY) follows through with its plans, the company will be cutting its dividend by around 72% from its previous $0.072 per year level. Hedge fund sentiment around Yamana Gold Inc. (USA) (NYSE:AUY) has been stable, with the number of elite funds long the stock falling by just one quarter-over-quarter to 16 as of the latest 13F filing period.
The short squeeze in VirnetX Holding Corporation (NYSEMKT:VHC) is still ongoing, as the value of its shares rose by another 44% today. VirnetX shares began rallying on January 12 after the company issued a press release saying that its pending patent infringement lawsuit against Apple Inc. (NASDAQ:AAPL) is on schedule, with VirnetX Holding Corporation (NYSEMKT:VHC) expected to present its side of things to a jury on January 25.
Of the 730 elite funds that we track, five of them owned $1.78 million worth of VirnetX shares on September 30, up from three funds on June 30.
On the next page we examine what’s happened today with CARBO Ceramics Inc and Tower Semiconductor Ltd.
It’s been a great Thursday for CARBO Ceramics Inc. (NYSE:CRR) shareholders, as the value of their shares has jumped by 20% so far. Although analysts at SunTrust cut their price target on the company to $15 from $19 a share yesterday, traders are buying CARBO Ceramics Inc. (NYSE:CRR) because the stock recently pierced through some key technical moving averages and because the price of crude WTI futures is up by around 2.5% in late afternoon trading. Given that 42% of the float is short, short covering could also have something to do with today’s rally.
The number of smart money funds with a stake in CARBO Ceramics Inc fell by 50% during the third quarter, to 7.
Last but not least, Tower Semiconductor Ltd. (USA) (NASDAQ:TSEM) is 10% lower after Spruce Point Capital published a bearish report on the company. In the report, Spruce Point suggested that Tower Semiconductor had 50%-to-75% downside due to its ‘unproven and questionable business strategy of acquiring old semi foundries with unused capacity’ and due to the fact that the company was using potential accounting gimmicks ‘to bolster Tower’s appearance of profitability, margin and free cash flow enhancement’.
18 elite funds in our database owned 15% of Tower Semiconductor Ltd. (USA) (NASDAQ:TSEM) at the end of the third quarter.