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Here’s Why These Five Stocks Are Surging

All three major indexes are lower today after U.S. construction spending for the month of August unexpectedly fell for the second-consecutive month. According to the Commerce Department, construction spending inched lower by 0.7% year-over-year, versus expectations of a rise of 0.2%.

Although the broader indexes might be lower, shareholders of Nutanix Inc (NASDAQ:NTNX), VirnetX Holding Corporation (NYSEMKT:VHC), Payment Data Systems, Inc. (NASDAQ:PYDS), Five Star Quality Care, Inc. (NASDAQ:FVE), and Cognizant Technology Solutions Corp (NASDAQ:CTSH) are certainly happy today, as each stock has surged for various reasons. In this column, we’ll find out why traders are piling into the five stocks and check in on the smart money sentiment to see how some of the top hedge funds in the world were trading these equities in the second quarter.

We believe that imitating hedge funds and other large institutional investors can be helpful in identifying stocks capable of outperforming the broader market. Through extensive research that covered portfolios of several hundred large investors between 1999 and 2012, we determined that following the small-cap stocks that large money managers are collectively bullish on, can generate monthly returns nearly 1.0 percentage points above the market (see the details here).

Wall Street Bull

Wall Street Bull

After surging by 130% from its IPO price of $16 per share on the first day of trading, Nutanix Inc (NASDAQ:NTNX) shares are up by another 10% today as bullish traders buy the stock for its momentum characteristics. Some long-term investors may also be buying the stock for its strong growth potential, should the company execute well. Given that it has just entered into the public-trading arena, Insider Monkey doesn’t have any hedge fund holdings numbers concerning Nutanix Inc (NASDAQ:NTNX) yet.

VirnetX Holding Corporation (NYSEMKT:VHC) shares have surged by 35% after a jury ruled that Apple Inc. (NASDAQ:AAPL) should pay the company $302.4 million for infringing on two of its patents in relation to the tech giant’s FaceTime feature. Apple has, in turn, said that it will appeal and that VirnetX should only be awarded a maximum sum of $25 million. Given VirnetX’s current market cap and price action, it is evident that the market doesn’t expect VirnetX to receive the headline sum. Most traders expect the ultimate decision to be made by the U.S. Court of Appeals for the Federal Circuit in Washington. Of the 749 hedge funds that we track which filed 13Fs for the June quarter, five of them owned $976,000 worth of VirnetX Holding Corporation (NYSEMKT:VHC) shares at the end of the second quarter, which accounted for just 0.40% of its float.

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On the next page, we’ll examine why Payment Data Systems, Five Star Quality Care, and Cognizant Technology are in the green today.