Although the S&P 500 and Dow Jones are near record highs, shares of five major companies crumbled to 52-week lows last week.
In this article we’ll take a look at why VeriFone Systems Inc (NYSE:PAY), Dynavax Technologies Corporation (NASDAQ:DVAX), Gilead Sciences, Inc. (NASDAQ:GILD), Novo Nordisk A/S (ADR) (NYSE:NVO), and Bristol-Myers Squibb Co (NYSE:BMY) recently hit yearly lows and use the latest 13F data to determine how the world’s greatest investors are positioned among the five stocks.
Hedge fund sentiment is an important metric for assessing the long-term profitability. At Insider Monkey, we track over 750 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).
VeriFone Falls on Earnings
Although VeriFone Systems Inc (NYSE:PAY)‘s fiscal year 2016 third quarter earnings of $0.42 per share beat estimates by $0.02, the company’s shares were battered on Friday due to a substantial revenue miss. For the three months, VeriFone realized $493 million in sales, down by 3.3% year-over-year and missing the consensus mark by $22.54 million. Revenue was weak due to lingering EMV adoption issues and a difficult local market. Full-year guidance was also soft due to the aforementioned two reasons, with the company’s management expecting adjusted EPS of $1.64-to-$1.65 on adjusted sales of $2 billion for the fiscal year. Jeffrey Bronchick‘s Cove Street Capital established a new position of over 1.7 million shares in VeriFone Systems Inc (NYSE:PAY) in the second quarter.
FDA Cancels Ad Comm Review
Dynavax Technologies Corporation (NASDAQ:DVAX) fell sharply on Friday to hit a 52-week low after the FDA canceled the company’s November 16 meeting with the Vaccines and Related Biological Products Advisory Committee. The committee was originally set to review the BLA for Heplisav-B, Dynavax’s prospective hepatitis B vaccine, on that date. The FDA said that it needed more time to “review and resolve several outstanding issues.” Of the 749 hedge funds that we track which filed 13F’s for the June quarter, 23 were long Dynavax Technologies Corporation (NASDAQ:DVAX) at the end of June, down by six quarter-over-quarter.
On the next page we’ll find out why Gilead Sciences, Novo Nordisk, and Bristol-Myers Squibb each hit 52-week lows last week.
Mylan Epipen Controversy Sinks Several Big Pharma Stocks
Gilead Sciences, Inc. (NASDAQ:GILD), Novo Nordisk A/S (ADR) (NYSE:NVO), and Bristol-Myers Squibb Co (NYSE:BMY) each hit 52-week lows last week due to renewed worries over future government regulation concerning drug pricing. Although many drug executives learned their lesson in terms of not raising the price of older-generation drugs after the controversy caused by Martin Shkreli’s Turing Pharmaceuticals, which slapped a fifty-fold price increase on an essential medication last year, Mylan NV (NASDAQ:MYL) executives were somewhat tone-deaf and shamelessly increased the price of EpiPen noticeably this year.
The price increases eventually caused the media to ask why Mylan raised the price of the essential drug by six-fold since 2007. Although Mylan eventually relented and cut the price of EpiPen in half by introducing a generic, drug pricing is now a campaign issue that doesn’t look like it will go away any time soon. Hillary Clinton has promised to do something about unfair drug pricing if elected and Donald Trump has indicated that he will do something similar (Trump has said that he will both control government drug spending and that he will not let people die on the streets). If big pharma cannot raise the price of certain older drugs, it will not be as profitable as previously expected.
85 hedge funds in our database were long Gilead Sciences, Inc. (NASDAQ:GILD) on June 30, while 61 had bullish positions in Bristol-Myers Squibb Co (NYSE:BMY), and 12 owned shares of Novo Nordisk A/S (ADR) (NYSE:NVO).