Although the broader market is relatively flat today, a number of stocks are more volatile then the main indexes.
With this in mind, let’s take a closer look at Cummins Inc. (NYSE:CMI), Hess Corp. (NYSE:HES), Dynavax Technologies Corporation (NASDAQ:DVAX), Barnes & Noble, Inc. (NYSE:BKS), and ExOne Co (NASDAQ:XONE) and see why these stocks are trending today. In addition, we are going to assess the hedge fund sentiment towards them.
Through extensive research, we determined that imitating some of the picks of hedge funds and other institutional investors can help generate market-beating returns over the long run. The key is to focus on the small-cap picks of these investors, since they are usually less followed by the broader market and are less price-efficient. Our backtests that covered the period between 1999 and 2012, showed that following the 15 most popular small-caps among hedge funds can help a retail investor beat the market by an average of 95 basis points per month (see the details here).
Cummins Falls on Volkswagen Navistar Alliance
Traders sold Cummins Inc. (NYSE:CMI) to the tune of 6.2% after Volkswagen stuck a deal to buy a substantial stake in Navistar International Corp (NYSE:NAV) for $256 million. In addition to the cash proceeds, the alliance is expected to yield synergies of up to $500 million after five years. Given that Navistar was in relatively poor financial shape before the alliance, a strengthened Navistar is not good news for Cummins as it could potentially lead to lower market share/margins down the road. Natixis Global Asset Management‘s Harris Associates trimmed its position in Cummins Inc. (NYSE:CMI) by 11% 8.66 million shares during the second quarter.
Hess Victim of Profit Taking, Soft Oil
Last weekend’s Russia-Saudi Arabia joint statement failed to make much of a difference in the energy sector as front month WTI futures are down 0.6% at around $44 per barrel. Given the poor price action in the commodity and Hess Corp. (NYSE:HES)‘s technical weakness, some traders evidently decided to take profits. Hess shares are down by 3.5% this afternoon as technical traders sell due to the stock falling below several key moving averages and fundamental investors don’t buy until WTI prices trend higher (at least in the short run). Of the around 750 funds we track, 37 were long Hess Corp. (NYSE:HES) at the end of the second quarter, down by two from the previous quarter.
On the next page, we examine why traders are buying Dynavax Technologies Corporation, Barnes & Noble, and ExOne today.