Shares of Edwards Lifesciences Corp (NYSE:EW), Integrated Device Technology Inc (NASDAQ:IDTI), Hartford Financial Services Group Inc (NYSE:HIG), and Cummins Inc. (NYSE:CMI) are trending in morning trading for various reasons. Let’s find out why and analyze how hedge funds are positioned in these stocks.
We pay attention to hedge funds’ moves because our research has shown that hedge funds are extremely talented at picking stocks on the long side of their portfolios. It is true that hedge fund investors have been underperforming the market in recent years. However, this was mainly because hedge funds’ short stock picks lost a ton of money during the bull market that started in March 2009. Hedge fund investors also paid an arm and a leg for the services that they received. We have been tracking the performance of hedge funds’ 15 most popular small-cap stock picks in real time since the end of August 2012. These stocks have returned 102% since then and outperformed the S&P 500 Index by around 53 percentage points (see the details here). That’s why we believe it is important to pay attention to hedge fund sentiment; we also don’t like paying huge fees.
Edwards Lifesciences Corp (NYSE:EW) has rallied by 4.05% in morning trading after the company reported third quarter earnings of $1.07 per share on revenues of $615.5 million, beating estimates by $0.09 per share and $17.21 million, respectively. Guidance is solid, with management expecting EPS of $1.11-to-$1.21 and revenue of $620 million-to-$660 million, versus expectations of EPS of $1.14 and revenue of $630.68 million. Edwards Lifesciences’ stock has done well in 2015, with shares up by 20.64% year-to-date as investors remain optimistic about the company’s future growth opportunities. Hedge funds are also optimistic; 46 of the 730 elite funds we track reported stakes in the company worth $2.16 billion as of the end of June, up from 38 funds with stakes valued at $1.72 billion as of the end of March. Cliff Asness‘ AQR Capital Management owned 2.4 million shares at the end of the second quarter.
Shares of Integrated Device Technology Inc (NASDAQ:IDTI) are up by almost 9% after the technology company reported second quarter earnings of $0.35 per share on revenues of $169.5 million, beating estimates by $0.04 per share and $1 million, respectively. Demand is strong, as gross margins increased by 2.2 percentage points year-over-year to 63.4% and revenues increased by 24% year-over-year. Integrated Device Technology Inc (NASDAQ:IDTI) is not content in just expanding organically, as management announced the company will acquire ZMDI, a provider of power management, sensors, and LED IC’s for $310 million. The all-cash deal should add $20 million to quarterly revenues at 57% gross margins. In addition, the board approved a new share repurchase authorization of $300 million.
Hedge funds are bullish on the stock. Although the number of funds long on the stock decreased to 43 from 45, the total value of their holdings in the stock increased to $564.76 million, which was worth 17.50% of the float at the end of the second quarter, from $441.62 million at the end of the first quarter.
On the next page, we examine why Hartford Financial Services and Cummins are trending.