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Wednesday’s Hottest Stocks: Toyota, Chipotle, Staples, More

The market has lost some of its zeal today amid disappointing earnings reports from some major companies, with the Dow Jones, S&P 500, and Nasdaq all dipping by about 0.2%. Some of the important stocks to watch today are Staples, Inc. (NASDAQ:SPLS), Office Depot Inc (NASDAQ:ODP), Toyota Motor Corp (ADR) (NYSE:TM), Chipotle Mexican Grill, Inc. (NYSE:CMG), and Align Technology, Inc. (NASDAQ:ALGN). Let’s see why these stocks are on the move today and analyze what hedge funds think of them.

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).

FTC Kills Staples and Office Depot Merger, Again  

Shares of both Staples, Inc. (NASDAQ:SPLS) and Office Depot Inc (NASDAQ:ODP) have plunged this morning after the companies called off their $6.3 billion merger after a Federal Judge in Washington granted a preliminary injunction requested by the Federal Trade Commission. The FTC challenged the merger back in December, saying that the deal between Staples, Inc. (NASDAQ:SPLS) and Office Depot Inc (NASDAQ:ODP) would violate antitrust law and hurt competition in the office supply retail industry, resulting in higher prices and reducing the quality of office products. In a statement, Staples’ CEO Ron Sargent said that the companies are “extremely disappointed” by the court’s decision to grant the FTC’s request, despite its inability to prove its case. The FTC also blocked a merger between the two companies in 1997. Shares of Staples are down by over 17% this morning, while those of Office Depot have crumbled by over 38%.

At the end of last year, 49 funds out of those we track held around $1.05 billion worth of long positions in Staples, Inc. (NASDAQ:SPLS). Richard S. Pzena’s Pzena Investment Management owns more than 34.36 million shares of the company as of March 31. On the other hand, Sander Gerber’s Hudson Bay Capital Management has around 4.01 million shares of Office Depot Inc (NASDAQ:ODP) in its portfolio as of the end of March.

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Toyota Braces for Profit Decline, Announces Fiscal Fourth Quarter Results

Toyota Motor Corp (ADR) (NYSE:TM) is 4.67% in the red this morning after the company said that it is expecting a 35% decline in profit to ¥1.5 trillion ($13.8 billion or) for fiscal year 2016 ended March 31, 2017, far beneath analysts’ expectations of ¥2.2 trillion. This would be the first ever profit decline in five years for the Japanese carmaker. The company is being hit by the rising yen, recall and replacement costs, and a supply-chain disruption after earthquakes in southwestern Japan in April. The company also announced its fourth quarter of fiscal year 2016 financial results today. Operating profit for the quarter declined by 14% year-over-year to $4.88 billion, while net income slipped by 4.4% to $3.79 billion, on revenue of $61.97 billion.

13 hedge funds in our database were shareholders of Toyota Motor Corp (ADR) (NYSE:TM) at the end of last year. Ken Fisher’s Fisher Asset Management owns 70,385 shares of the company as of March 2016.

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On the next page we will discuss why Chipotle Mexican Grill and Align Technology have people talking today.

Chipotle Mexican Grill Continues to Suffer E. coli Scandal Aftermath

Chipotle Mexican Grill, Inc. (NYSE:CMG) announced that it has hired two food safety experts, including David Acheson, one of the most vehement critics of the Denver-based burrito company. Chipotle Mexican Grill has been in hot water since an outbreak of E. coli last year forced it to close several restaurants. The company has lost customers and approximately $6 billion has been wiped from its market valuation amid the scandal. Last week, Food Safety News reported that Chipotle had written a letter to the Centers for Disease Control and Prevention (CDC) in December of last year, accusing the regulatory body of spreading misinformation to the public. The CDC rejected those claims in its response. Chipotle’s shareholder meeting is slated to take place today, in which its investors are expected to demand a shakeup of the company’s board amid its poor performance and plunging stock. So far, shares of Chipotle have lost 29% over the last year. Shares are down by 0.73% today.

Out of the 785 hedge funds in our database, 39 funds held positions in Chipotle Mexican Grill, Inc. (NYSE:CMG) at the end of the fourth quarter, with a total value of around $1.1 billion. Andreas Halvorsen’s Viking Global held ownership of approximately 689,000 shares of the company on December 31.

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Align Technology Gets ‘Outperform’ Rating from Credit Suisse

Analysts at Credit Suisse initiated coverage on Align Technology, Inc. (NASDAQ:ALGN) in a note to investors this morning, setting an ‘outperform’ rating and $84.00 price target on the stock. The firm says that Align Technology has the potential for revenue growth because of its growing portfolio of patented technologies. The stock is 0.40% in the red today. As of March 31, Clifford Fox’s Columbus Circle Investors had more than 1.1 million shares of Align Technology, Inc. (NASDAQ:ALGN) in its portfolio.

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Disclosure: None

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