The US stock markets gained ground further on Thursday morning as market volatility after Brexit continues to subside. Investors also await an important speech by key Federal Reserve policy maker James Bullard.
Several stocks are worth watching today, including Opko Health Inc. (NASDAQ:OPK), Transition Therapeutics Inc (USA) (NASDAQ:TTHI), Ally Financial Inc (NYSE:ALLY), Darden Restaurants, Inc. (NYSE:DRI) and McCormick & Company, Incorporated (NYSE:MKC). Let’s find out why these stocks are in the spotlight today and also analyze the hedge fund sentiment towards them.
Hedge fund sentiment is an important metric for assessing long-term profitability. At Insider Monkey, we track over 760 hedge funds, whose quarterly 13F filings we analyze to determine their collective sentiment towards several thousand stocks. However, our research has shown that the best strategy is to follow hedge funds into their small-cap picks. This approach can allow monthly returns of nearly 95 basis points above the market, as we determined through extensive backtests covering the period between 1999 and 2012 (read more details here).
Opko Health to Acquire Transition Therapeutics
Opko Health Inc. (NASDAQ:OPK) and Transition Therapeutics Inc (USA) (NASDAQ:TTHI) are in the spotlight today after both companies announced an agreement under the terms of which Opko Health will acquire Transition Therapeutics for approximately $60 million, or $1.55 per share. In a statement, CEO of Opko, Phillip Frost, M.D., said that the acquisition provides Opko with multiple drugs with heavy potential and added that Opko is “ideally positioned” to leverage Transition Therapeutics’ clinical programs and bring them to market for the benefit of patients. A total of 16 hedge funds from our database were bullish on Opko Health Inc. (NASDAQ:OPK) at the end of the first quarter, while only four funds held shares of Transition Therapeutics Inc (USA) (NASDAQ:TTHI).
Ally Financial Passes Fed’s Stress Test
Ally Financial Inc (NYSE:ALLY)’s stock has gained over 2% so far today after passing the US Federal Reserve’s annual stress test on Wednesday. After the approval, the bank is free to pay a dividend of $0.08 per share and conduct a buyback of $700 million. The Federal Reserve’s stress test was adopted after the 2008 financial crisis to judge a company’s capability to withstand a major economic downturn. The Michigan based financial services company’s common equity Tier 1 ratio was 5.2%, above the Fed’s minimum required level of 4.5%. Stephen Feinberg’s Cerberus Capital Management is one of 51 hedge funds from our database that reported stakes in Ally Financial Inc (NYSE:ALLY) as of the end of the first quarter.
On the next page, we will take a loot at today’s stock movements of Darden Restaurants and McCormick.
Darden Restaurants Beats EPS Estimates
Darden Restaurants, Inc. (NYSE:DRI)’s stock has lost over 4% after the company posted financial results for the fiscal fourth quarter. The restaurant operator reported EPS of $1.10, better than the estimated $1.08, but revenue of $1.79 billion missed the estimates of $1.81 billion. Darden’s CEO Gene Lee said in a statement that the latest financial results strengthen the company’s belief that its “back to basics” operating philosophy to increase guest loyalty is working. Among the investors we track, 38 funds held stakes in Darden Restaurants, Inc. (NYSE:DRI) at the end of the first quarter, up from 32 funds a quarter earlier. Jeffrey Smith’s Starboard Value LP owns more than 6.6 million shares of the company.
McCormick & Company
McCormick & Company, Incorporated (NYSE:MKC)’s stock opened lower but has regained some ground and is nearly flat so far today after the company posted better-than-expected fiscal second quarter results. The spice and herbs manufacturer, headquartered in Maryland, posted EPS of $0.75, up from the analysts’ consensus of $0.74. Revenue in the quarter was $1.06 billion, in-line with the estimates. For the full year, McCormick & Company expects adjusted earnings in the range of $3.65 to $3.75 a share. McCormick’s President and CEO, Lawrence Kurzius, said in a statement that the growth in the quarter was driven by a rise in consumer demand for healthy products. A total of 18 funds from our database were bullish on McCormick & Company, Incorporated (NYSE:MKC) at the end of the first quarter. Among them, Cliff Asness’ AQR Capital Management owns 440,299 shares of the company.