In contrast to yesterday’s action, the major indexes are all green today, with crude futures leading the way, up by 5%. Among the stocks generating the most buzz this morning are Under Armour Inc (NYSE:UA), Ruby Tuesday, Inc. (NYSE:RT), Gap Inc (NYSE:GPS), Ulta Salon, Cosmetics & Fragrance, Inc. (NASDAQ:ULTA), and Intercept Pharmaceuticals Inc (NASDAQ:ICPT), all of which were making big moves even before the market opened. Let’s take a closer look at why these stocks have stirred up intense interest and see what the hedge funds that we track think of them.
At Insider Monkey, we track around 785 hedge funds and institutional investors. Through extensive backtests, we have determined that imitating some of the stocks that these investors are collectively bullish on, can help retail investors generate double digits of alpha per year. The key is to focus on the small-cap picks of these funds, which are usually less followed by the broader market and allow for larger price inefficiencies (see the details here).
Under Armour Inc (NYSE:UA) shares may look like they have fallen by almost 50% (technically they have) but the reality is that the stock has basically undergone a two-for-one stock split, with Under Armour class C shares being distributed to shareholders of record on Friday. Those class C shares, which constitute non-voting stock, will begin trading today under the symbol UA.C. Besides the stock split, there isn’t much else of note concerning the stock at this time, which is otherwise trading down by 0.34% today when factoring out the stock split. 25 elite funds in our system held 1.3% of Under Armour Inc (NYSE:UA)’s float at the end of December.
Ruby Tuesday, Inc. (NYSE:RT) is off by 14% this morning after the restaurant chain reported disappointing third quarter of fiscal year 2016 financial results. For the quarter, Ruby Tuesday earned $0.03 per share on revenue of $271.47 million, missing consensus estimates by $0.02 per share and $12.67 million, respectively. Same-restaurant sales retreated by 3.1% year-over-year, which included a 140 basis point negative impact due to temporary store closures due to severe winter weather. Guidance also wasn’t pretty, with the company cutting its full fiscal year 2016 EPS guidance to $0.05-to-$0.08 from the previous $0.12-to-$0.17 range. Management expects same-store sales to decline by roughly 1% year-over-year for the fiscal year. The total number of elite funds long Ruby Tuesday, Inc. (NYSE:RT) fell by almost half to 11 by the end of December, from 20 at the end of September. Among the stalwart shareholders was Jim Simons’ Renaissance Technologies, which raised its stake by 12% to 963,169 shares.
On the next page we examine why Gap Inc, Ulta Salon Cosmetics & Fragrance, and Intercept Pharmaceuticals are all trending this morning.
Gap Inc (NYSE:GPS) shares are almost 9% in the red after the fashion retailer reported disappointing March sales results. For the month, Gap Inc (NYSE:GPS) had net sales of $1.43 billion versus the net sales of $1.53 billion that it reported for March of 2015. The weak results translate to a roughly 6% decline in comparable sales results. Demand also appears to be weak, with Gap reporting that its inventory entering April was higher than expected. The higher inventories could lead to lower-than-expected gross margins when Gap announces its first quarter results in mid-May. The number of elite funds holding shares of the fashion retailer fell by 50% to 17 at the end of the fourth quarter. Cliff Asness’ AQR Capital Management owned slightly over 2.00 million Gap shares at the end of 2015.
According to the S&P Dow Jones Indices, Ulta Salon, Cosmetics & Fragrance, Inc. (NASDAQ:ULTA) will officially replace Tenet Healthcare Corp (NYSE:THC) in the S&P 500 beginning April 15, after shares of the latter crumbled by 42% over the past year. Given that knowledge, investors are bidding up Ulta by roughly 3% now to front-run the mutual funds that have to buy into Ulta on or after the 15th. The number of elite funds in our database long Ulta Salon, Cosmetics & Fragrance, Inc. (NASDAQ:ULTA) increased by one to 31 quarter-over-quarter as of December 31.
Intercept Pharmaceuticals Inc (NASDAQ:ICPT) shares have been volatile this morning after the FDA’s Gastrointestinal Drugs Advisory Committee voted unanimously to back approval for Intercept’s obeticholic acid for the treatment of primary biliary cholangitis. Shares of Intercept Pharmaceuticals Inc (NASDAQ:ICPT) originally rallied by 5% in pre-market trading, but are now down by 4%. The advisory committee members had some general concerns over the validity of serum alkaline phosphatase (ALP) levels as a surrogate endpoint (SEP), but they concluded that the benefits outweighed the risks. The FDA has a deadline/PDUFA date of May 29 to approve or disapprove the drug. 16 funds that we track held roughly 7.6% of Intercept’s shares at the end of 2015.