It’s the beginning of a new trading week as oil and gas are in the red. Among the stocks traders are watching today include Proofpoint Inc. (NASDAQ:PFPT), Red Hat Inc. (NYSE:RHT), International Business Machines Corporation (NYSE:IBM), NXP Semiconductors N.V. (NASDAQ:NXPI), and Tower International Inc. (NYSE:TOWR). Let’s find out why each stock is in the spotlight.
For those of you interested in potentially partly diversifying your portfolio with hedge fund picks, see the Insider Monkey quarterly newsletter (click the link for more details) , which was up 121% since inception in May 2014 through the end of August of 2018. Hedge fund picks can often help investors diversify and they are often made by very smart investors.
JuliusKielaitis / Shutterstock.com
Red Hat Inc. (NYSE:RHT) shareholders are very happy today after International Business Machines Corporation (NYSE:IBM) agreed to buy the company. Shares of the stock are up 45% after IBM agreed to pay $190 in cash per share or $34 billion in enterprise value for the tech company. In terms of the reason why IBM made its move, management believes the deal will work out by helping it become the world’s number one hybrid cloud provider. IBM believes the deal will be gross margin and cash flow accretive within 12 months, and accelerate revenue growth as well. The cloud is a major emerging growth market and will hopefully help IBM support its solid and growing dividend.
Some traders aren’t as optimistic as management. Due to the cash needed to buy Red Hat, some in the market estimate that IBM would need to raise as much as $25 billion in new debt. Due to that new debt raise, IBM’s leverage could peak above 3x EBITDA. Big Blue shares are in the red as of late afternoon trading. In terms of hedge fund sentiment, Red Hat Inc. (NYSE:RHT) was owned by 29 top funds that we track out of around 645 at the end of Q2. Although Warren Buffett may have sold shares in the stock, 46 top funds still owned International Business Machines Corporation (NYSE:IBM) at the end of the same time period. Speaking of big companies, check out the top 10 largest companies in the world by market cap in 2018.
After news of the Red Hat purchase, shares of cloud companies such as Proofpoint Inc. (NASDAQ:PFPT) have taken off. Shares are up almost 8% after analysts at KeyBanc and Goldman upgraded the stock, with the former setting a $120 price target and ‘Overweight’ designation and the latter setting a $114 target and a ‘Buy’ designation. Proofpoint is a cloud based company that delivers enterprise security services for companies. According to our data, 29 elite funds were in Proofpoint Inc. (NASDAQ:PFPT) at the end of the second quarter, up nine from that of the previous quarter.
Traders are watching shares of NXP Semiconductors N.V. (NASDAQ:NXPI) due to the news that the stock will become a component of the NASDAQ-100 index, as well as the NASDAQ-100 Technology sector index prior to market open on November 5. If a stock is part of an index, certain funds may have to buy the stock, potentially sending demand for shares up. Shares of the semi-conductor company haven’t done well this year, falling nearly 40% year to date due to the failed merger attempt with Qualcomm. NXP Semiconductors N.V. (NASDAQ:NXPI) seems to be holding its own in terms of the hedge fund crowd though, at least in terms of the past. 94 top funds were in NXPI at the end of Q2, up 22 from the end of Q1.
Tower International Inc. (NYSE:TOWR) is up almost 14% after the company reported better than expected Q3 earnings. Adjusted EPS came in at $1.08, sales came in at $524.57 million, beating the Street by $0.10 per share and $9.35 million. Free cash flow also increased to $17.9 million, versus $13.63 million a year ago. In terms of FY18 guidance, management sees adjusted EPS of $4.20 and free cash flow of $50 million. Tower International Inc. (NYSE:TOWR) shares also offer a dividend yield of around 1.8%.
Disclosure:None
