Top 20 Most Popular Stocks Among Financial Advisors Dominated by Tech and Healthcare

With investors preparing to enter 2016, several interesting trends could have been noticed in the last trading week of December. According to TrackStar data, which includes an analysis of stocks that financial advisors have been searching, several interesting trends emerged in the week between December 27 and January 2. The list of the top 20 most searched stocks was heavily dominated by technology stocks, with nine companies making the list. The healthcare was also widely followed, with five stocks making the top 20. On the other hand, as oil prices have been sliding, it seems that investors have been looking away from energy stock and only one company was ranked in the top 20 (as compared to four companies in the previous ranking that you can see here). With this in mind, let’s take a closer look at some of the highlights from the top 20 most searched stocks among financial advisors compiled by TrackStar, the official newsletter of Intuition, which is a division of InvestingChannel.

Aside from looking at the stocks and the developments that draw the attention towards them, we are also going to see what the smart money investors think about these companies. This is where our research comes in handy. At Insider Monkey, we track the activity of some 730 hedge funds and other institutional investors and, by analyzing their quarterly 13F filings, we determine which stocks these investors are bullish on and which companies have been overlooked by them. This allows us to benefit from the extensive research and experience that these investors employ to generate returns and by focusing on the 15 small-cap stocks that they are collectively fond of, we can obtain significant profits over the long-run (see more details here).

Let’s start with the top of the list, which is represented by Sunedison Inc (NYSE:SUNE), whose stock lost 13% in volatile trading last week. At the end of December, the company said that its subsidiary, Seller Note, LLC, reached an agreement to extinguish the all of its outstanding principal amount of 3.75% Guaranteed Exchangeable Senior Secured Notes due 2020 worth $336 million. The noteholders will obtain membership interest in some of SunEdison’s membership equity interest in renewable energy assets under development and class A shares of TerraForm Power Inc (NASDAQ:TERP). Sunedison Inc (NYSE:SUNE)’s stock jumped on the back of the news, but retracted in the intraday trading on December 30 and closed just 1% in the green.

Despite a recovery in December, Sunedison Inc (NYSE:SUNE)’s stock dropped by more than 72% in 2015, as investors have been concerned about the company’s debt and whether or not the company will be able to fund its projects over the long-run. However, the increasing popularity of solar energy and the company’s exposure to important emerging markets make the stock attractive for the long-run.

Nevertheless, smart money investors are bullish on Sunedison and consider the stock to be highly misunderstood by the market. Even though among the funds tracked by Insider Monkey, the company’s popularity declined during the third quarter, these investors still held nearly 47% of the company at the end of September. However, 73 funds amassed stakes with a total value of $1.06 billion heading into the fourth quarter, versus 93 funds with stakes worth $5.68 billion in aggregate a quarter earlier. One of the most bullish investors on Sunedison, has been David Einhorn of Greenlight Capital. Greenlight held 18.61 million shares of SunEdison at the end of September, having trimmed the position by 26% between July and September.

However, in his third-quarter investor letter, Einhorn reiterated his bullish position on Sunedison Inc (NYSE:SUNE) and said that “the market’s focus is too narrow.”

“SUNE’s hard-to-decipher financial statements fed the stock collapse. SUNE consolidates both TERP and GLBL on its GAAP statements. The complicating result is two-fold: First, when SUNE sells a project to TERP or GLBL it bears the operating costs but doesn’t get to book the revenue from the sale. The result is the appearance of an operating loss. Second, TERP and GLBL use non-recourse project finance debt to fund the purchases and the debt appears on SUNE’s balance sheet. The result is that SUNE appears to be heavily levered and losing money. From a GAAP perspective that’s true, but from an economic perspective it is not,” Einhorn said.

In this way, Greenlight forecasted economic 2016 EPS of $1.34, which compares to a loss of $1.86 that analysts currently expect Sunedison Inc (NYSE:SUNE) to deliver next year. You can read more about Einhorn’s take on SunEdison in our article covering Greenlight’s third-quarter investor letter.

After being on the first spot of the top 20 list for weeks, Apple Inc. (NASDAQ:AAPL) lost some popularity and slid to the third position. The stock inched down by more than 2% in the last trading week of 2015, but lost more than 6% since the start of 2016 as investors become more and more concerned about the company’s iPhone sales, which might decline, on the back of reports that Apple is scaling back the production orders. The decline of the stock emphasizes the company’s dependence on the iPhone and put more pressure on investors that had been riding the iPhone sales wave for the past several years. Nevertheless, Apple’s huge cash pile and new product cycle that should come with the launch of a new iPhone later this year, should help Apple Inc. (NASDAQ:AAPL)’s shares offset the decline caused by current concerns.

Among the investors we track, Apple Inc. (NASDAQ:AAPL) is the second most popular stock with 133 funds reporting long positions as of the end of September. However, the company registered a slight decline in popularity with the number of funds bullish on the stock having fallen by 11 during the third quarter and the 133 funds that reported holding shares in the last round of 13F filings amassed 2.80% of the company’s outstanding stock heading into the fourth quarter. Nevertheless, Carl Icahn, David Einhorn, and other top investors remained big fans of Apple.

Among healthcare companies, Chimerix Inc (NASDAQ:CMRX) ranked as the most searched among financial advisors and was the fifth most popular overall. The stock plunged by 75% during the week, after the company said that its Phase 3 SUPPRESS trial of brincidofovir involving patients undergoing hematopoietic cell transplantation did not achieve the endpoint in the prevention of cytomegalovirus. Chimerix Inc (NASDAQ:CMRX) also announced plans to continue testing brincidofovir in adenovirus infections and smallpox.

The decline was slightly offset by a following disclosure of an investor building a massive stake in the company. Steven Cohen’s Point72 Asset Management, which is one of the most successful funds on the Street, reported a 5.3% passive stake in the company, days after the stock plunged on the back of disappointing Phase 3 results. Overall, out of more than 730 funds in our database, 17 held shares of the company at the end of September, amassing 11.70% of the company. Samuel Isaly’s OrbiMed Advisor and Jeremy Green‘s Redmile Group are two other investors that bet on Chimerix Inc (NASDAQ:CMRX) going into the fourth quarter.

Another tech stock that jumped to the top 20 is Twitter Inc (NYSE:TWTR). The company’s shares plunged by 38% during 2015, as the company failed to impress investors with performance and underwent management changes. 2016 will be a crucial year for Twitter, since the recently appointed CEO Jack Dorsey is expected to convince investors that Twitter Inc (NYSE:TWTR) can deliver a product capable of facing competition from Facebook Inc (NASDAQ:FB), Alphabet Inc (NASDAQ:GOOGL), or Apple Inc. (NASDAQ:AAPL). Just a couple of days ago, reports started to emerge that Twitter is considering to expand its 140-character limit to 10,000 characters. Even though, this move alone won’t be able to revamp Twitter’s sluggish growth rate, it could be a sign that Dorsey is capable to face the challenges ahead and attract the interest of investors.

So far, the sentiment towards Twitter Inc (NYSE:TWTR) among the smart money investors is rather weak. Between July and September, the number of funds with long positions (among those tracked by Insider Monkey) slid to 27 from 47 and these funds amassed just 1.40% of the company’s outstanding stock at the end of September. By comparison, 128 investors held shares of Facebook Inc (NASDAQ:FB) at the end of the third quarter, amassing 3.50% of the company, compared to 133 funds a quarter earlier.

Valeant Pharmaceuticals Intl Inc (NYSE:VRX) is another healthcare company that made the top 20 list, jumping to the 12 spot. The stock slid by some 15% between December 28 and January 4. The company announced last week that its CEO J. Michael Pearson was on medical leave following a severe pneumonia diagnosis. Yesterday, Valeant said that Howard Schiller would replace Pearson as interim CEO. The stock slid by more than 54% in the last six months of 2015, as the company faced scrutiny regarding some of its business practices, but most smart money investors believe the drop to be an overreaction by the stock being targeted by short sellers. Jeff Ubben and Bill Ackman are two of the top shareholders of Valeant Pharmaceuticals Intl Inc (NYSE:VRX). In a recent SEC filing, Ackman’s Pershing Square reported the sale of some 5.02 million shares of Valeant, reducing the stake to 29.09 million shares, equal to 8.5% of outstanding stock. However, the filing stated that the shares were sold for two onshore partnerships, in order to generate a tax loss for their investors before the end of 2015. Overall, 88 funds among those we track held shares of Valeant Pharmaceuticals Intl Inc (NYSE:VRX) at the end of September, down by 10 over the quarter.

In his third-quarter investor letter, Ackman said that Valeant’s large portfolio of products, which could be sold in order to deleverage the company, as well as its cash flow-generating business, among other things, make the stock attractive.

“Once we determined that the risk of financial default was extremely small and the stock was trading at an enormous discount to intrinsic value, we considered various approaches to increasing our investment. Generally, we purchase stocks outright to get exposure to a particular investment. In this case, we took advantage of the high volatility of Valeant stock, its extremely low share price, and the high degree of market uncertainty in choosing to build a position that offered us a compelling reward for the potential risk,” Ackman said.

The investor added that even though Valeant Pharmaceuticals Intl Inc (NYSE:VRX) might register a disruption in its dermatology business, the company still sports strong fundamentals. The agreement with Walgreens Boots Alliance Inc (NASDAQ:WBA) signed in December, will expand Valeant’s reach to customers and will help it to regain credibility through the partnership with the largest pharmacy chain in the US.

“The company will likely file its 10-K in February with the results of Price Waterhouse’s year-end audit. This should comfort investors who have concerns about Valeant’s accounting. While we expect a messy fourth quarter due to the shutdown of Philidor and investigative costs, the company should be able to post “clean” quarters beginning in the second quarter of next year. With the passage of time, the reduction in uncertainty, increased transparency, the reporting of operating results which we anticipate to be strong, along with the deleveraging of the balance sheet, we expect Valeant stock to rise substantially,” Ackman added.

On the next page you can see the full list of top 20 stocks most searched by financial advisors last week.

Disclosure: none