Although investors are still on edge after Friday’s sharp fall, Monday’s positive price action in the S&P 500 and Dow have soothed fears that the market could enter a prolonged slump.
In this article, we’ll analyze why five stocks are capturing investors’ interest today and use the latest 13F data to see how the collection of successful hedge funds in our system traded the five in the second quarter. Those stocks are Weight Watchers International, Inc. (NYSE:WTW), Anadarko Petroleum Corporation (NYSE:APC), Freeport-McMoRan Inc (NYSE:FCX), Farmer Brothers Co. (NASDAQ:FARM), and LendingClub Corp (NYSE:LC).
While there are many metrics that investors can assess in the investment process, the hedge fund sentiment is something that is often overlooked. However, hedge funds and other institutional investors allocate significant resources while making their bets and their long-term focus makes them the perfect investors to emulate. This is supported by our research, which determined that following the small-cap stocks that hedge funds are collectively bullish on can help a smaller investor to beat the S&P 500 by around 95 basis points per month (see the details here).
Weight Watchers International, Inc. (NYSE:WTW) shares are 2.61% in the red in pre-market trading after the company announced that its CEO, James Chambers, will step down effective September 30. Weight Watcher’s Board of Directors has already commenced finding a new permanent CEO to replace Chambers. Growth for the company will continue, although at what pace is an open question. CFO Nicholas Hotchkin said that “we remain confident we will deliver revenue and earnings growth in 2016, and that Q3 will be our fourth consecutive quarter of year-over-year member recruitment growth.” Phill Gross and Robert Atchinson‘s Adage Capital Management owned 800,000 shares of Weight Watchers International, Inc. (NYSE:WTW) at the end of the second quarter.
Two energy companies are in the spotlight after Anadarko Petroleum Corporation (NYSE:APC) agreed to purchase Freeport-McMoRan Inc (NYSE:FCX)‘s deepwater assets in the Gulf of Mexico for $2 billion. Anadarko’s purchase doubles its ownership in the Lucius development to around 49% and adds around 80,000 BOE of production to its total. In addition, Anadarko’s management expects the deal to generate $3 billion of incremental Gulf of Mexico free cash flow over the next half-decade at current strip prices and to be immediately accretive. To finance the purchase, Anadarko has announced a public offering of 35.25 million shares of common stock in addition to granting the deal underwriter a 30-day option to buy up to an additional 5.2875 million shares. Freeport-McMoRan is selling the deepwater assets to reduce its debt and deleverage. Anadarko shares are down by nearly 5% in the early morning hours, while Freeport’s are down by a little over 1%.
Of the 749 hedge funds that we track which filed 13Fs for the June quarter, 30 were long Freeport-McMoRan Inc (NYSE:FCX) on June 30, while 48 owned shares of Anadarko Petroleum Corporation (NYSE:APC).
On the next page we’ll find out why Farmer Brothers and LendingClub are in the spotlight this morning.
Traders are talking about Farmer Brothers Co. (NASDAQ:FARM) after the company reported softer-than-expected fourth quarter of fiscal year 2016 results. For the period, Farmer Brothers earned $0.23 per share on revenue of $134.2 million, missing the consensus estimates by $0.09 per share and $1.36 million respectively. Revenue inched up by 1.2% year-over-year, while adjusted EBITDA margin fell to 7.3%, down a full percentage point from a year earlier. Farmer Brothers’ management also announced a separate agreement to buy the premium tea business, China Mist Brands, from its founders, John Martinson and Dan Schweiker for $10.8 million plus a performance-based payment of $0.5 million. For its full 2016 fiscal year, the company realized non-GAAP net income per diluted share of $1.06, up from $0.71 in fiscal 2015. Revenue for the fiscal year was $544.4 million, down by 0.3% from fiscal year 2015. 11 funds in our system were long Farmer Brothers Co. (NASDAQ:FARM) at the end of the second quarter. Shares have slumped by 4% in morning trading.
LendingClub Corp (NYSE:LC) is in the headlines after the company announced that industry veteran Thomas Casey will join the company as Chief Financial Officer effective September 19. Casey has more than two decades of senior financial services leadership experience at major financial companies such as Citicorp, Washington Mutual, and GE Capital. LendingClub bulls hope that the announcement of a new CFO will help improve sentiment in the stock, which is down by almost 50% year-to-date. The number of funds that we track with holdings in LendingClub Corp (NYSE:LC) rose to 24 at the end of June, up by one quarter-over-quarter.