With crude futures down by 5% this morning due to oversupply concerns, and the VIX up by 14% to over 27, fear is absolutely permeating through the market right now as all three indexes are almost 2% lower. Going the opposite way are Code Rebel Corp (NASDAQ:CDRB), Alon Blue Square Israel Ltd (NYSE:BSI), Barrick Gold Corporation (USA) (NYSE:ABX), AngloGold Ashanti Limited (ADR) (NYSE:AU), and Agnico Eagle Mines Ltd (USA) (NYSE:AEM) as each stock is well in the green. Let’s find out why investors are buying these stocks and analyze what hedge funds think of each of them.
Hedge fund sentiment is an important metric for assessing the long-term profitability. At Insider Monkey, we track over 700 hedge funds, whose quarterly 13F filings we analyze and 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 (see the details here).
Shares of nano-cap Code Rebel Corp (NASDAQ:CDRB) have jumped by more than 84% this morning after the enterprise software development firm announced its entry into a non-binding letter of intent to engage in a merger with Aegis Identity Software. Aegis is a private company that manages identities comprised of students, families, faculty, alumni, and others that use its products. Under the terms of the letter of intent, Aegis Identity shareholders will own 60% of Code Rebel on a fully diluted basis following the merger. Code Rebel has also provided Aegis with an unsecured loan of $500,000 which charges an interest of 9%.
Given the nano-cap nature of the company, and the lack of concrete details of Aegis Identity’s financials, we would stay on the sidelines on this one. Of the 730 elite funds we track, two of them owned $206,000 in shares of Code Rebel Corp at the end of September.
Alon Blue Square Israel Ltd (NYSE:BSI) shares are almost 20% higher after the company announced receiving an additional offer to purchase its holdings in Blue Square Real Estate Ltd. Currently Alon Blue owns 53.92% of the outstanding shares of Blue Square Real Estate Ltd. Alon issued the following in a press release:
“The offer requests a no shop period until January 24, 2016 at 8pm Israel time, during which period the Company would negotiate only with the purchaser and not with any other party or otherwise receive offers for the sale by the Company of its interest in BSRE. To the extent the purchaser completes its inspection of BSRE to its satisfaction during this period and the parties reach agreement on a purchase agreement, the purchaser would purchase the Company’s interest in BSRE on an as-is basis based on a NIS 1.7 billion valuation of BSRE.
There is no guarantee that any purchase agreement will be signed for the transaction, and if signed, that such a transaction will be completed.”
Alon Blue Square rallied yesterday after its suppliers agreed to give the supermarket chain a few extra days to close a deal with a potential acquirer. The stock has been extremely volatile because of bankruptcy concerns. Given the obscure nature of Alon Blue Square Israel Ltd (NYSE:BSI), only one elite fund owned $25,000 worth of its shares as of September 30. We would stay on the sidelines on this one too.
On the next page we examine Barrick Gold Corporation (USA), AngloGold Ashanti Limited (ADR), and Agnico Eagle Mines Ltd (USA).