Here’s Why These Five Stocks Are in the Spotlight Today

With the Shanghai index in the green overnight volatility is pulling back and fear is retreating. Among the stocks trending this morning are FedEx Corporation (NYSE:FDX), Urban Outfitters, Inc. (NASDAQ:URBN), Gap Inc (NYSE:GPS), Cirrus Logic, Inc. (NASDAQ:CRUS), and Time Warner Inc (NYSE:TWX). Let’s find out why each stock is on the move.

In addition, we are going to analyze hedge fund sentiment toward the stocks, if relevant. Why do we pay attention to hedge fund sentiment. Most investors ignore hedge funds’ moves because as a group their average net returns trailed the market since 2008 by a large margin. Unfortunately, most investors don’t realize that hedge funds are hedged and they also charge an arm and a leg, so they are likely to underperform the market in a bull market. We ignore their short positions and by imitating hedge funds’ stock picks independently, we don’t have to pay them a dime. Our research have shown that hedge funds’ long stock picks generate strong risk adjusted returns. For instance the 15 most popular small-cap stocks outperformed the S&P 500 Index by an average of 95 basis points per month in our back-tests spanning the 1999-2012 period. We have been tracking the performance of these stocks in real-time since the end of August 2012. After all, things change and we need to verify that back-test results aren’t just a statistical fluke. We weren’t proven wrong. These 15 stocks managed to return 102% over the last 37 months and outperformed the S&P 500 Index by 53 percentage points (see the details here).

FedEx Corporation (NYSE:FDX)‘s acquisition of Dutch logistics provider TNT Express cleared another hurdle today, as European regulators gave its unconditional approval for the deal. FedEx has already received approval from the U.S. regulators last year. The deal, once officially closed, will make FedEx Corporation (NYSE:FDX) the second-largest European provider, narrowly trailing DHL. The hedge fund sentiment towards FedEx has been stable, with the number of funds from our database owning shares rising by one quarter-over-quarter to 53 at the end of September.

Urban Outfitters, Inc. (NASDAQ:URBN), a leading specialty retail company operating under the Anthropologie, Bhldn, Terrain, Free People, and Urban Outfitters brands, reported a 2% decline in comparable retail segment net sales for November and December, although management is somewhat optimistic on future sales trends. CEO Richard Hayne said:

“We continued to experience strong direct-to-consumer growth at all our Brands during this Holiday season. These gains were offset by weaker store sales which we believe was driven by declining store traffic. Highly effective inventory management by our merchant teams will leave us with clean inventories heading into the spring season.”

Urban Outfitters, Inc. (NASDAQ:URBN) was in the portfolio of 24 funds that we track at the end of the third quarter, down by four from the previous quarter.

On the next page, we examine Gap Inc, Cirrus Logic, and Time Warner.
Gap Inc (NYSE:GPS) shares are in the red this morning after the company reported that its comparable-store sales declined 5% last month. Leading the decline is the company’s Banana Republic segment with a 9% year-over-year retreat. Old Navy Global wasn’t too far behind, with a 7% decline. Gap Inc (NYSE:GPS) total sales fell 4% in the pivotal month and failed to meet analyst expectations. The number of funds tracked by Insider Monkey that were bullish on Gap increased by 13 to 34 between July and September.

Cirrus Logic, Inc. (NASDAQ:CRUS) is the latest Apple Inc. (NASDAQ:AAPL) supplier to cut its guidance, with management now expecting third quarter revenue of $347 million versus its previous estimate of $370 million to $400 million. CEO Jason Rhode said:

“Our preliminary revenue results reflect weaker than anticipated demand for certain portable audio products. This weakness escalated over the last few weeks of December and is expected to continue to significantly impact our revenue in the March quarter.”

Seeing as Cirrus Logic, Inc. (NASDAQ:CRUS) gets the majority of its revenue from Apple, Cirrus Logic’s stock could be volatile this year as many analysts believe that Apple’s iPhone sales will decline for the first time ever.

There is more stability in Time Warner Inc (NYSE:TWX)‘s top ranks now that the board has extended CEO Jeff Bewkes’ contract by three years. Bewkes has been the company’s CEO since 2008 and may need the extra authority given the New York Post report that activist funds are considering asking Time Warner Inc (NYSE:TWX) to either sell or spin-off the company’s crown jewel HBO division. Given Netflix Inc. (NASDAQ:NFLX)’s enormous valuation, many investors believe HBO would garner a much higher valuation if it were sold or spun-off.

Disclosure: none