On the third day of the week that kicks of the first quarter earnings seasons, all three indexes are higher and crude oil is threatening to make another monthly high. Leading the way among the green stocks are Micron Technology, Inc. (NASDAQ:MU), Twitter Inc (NYSE:TWTR), GoPro Inc (NASDAQ:GPRO), CSX Corporation (NASDAQ:CSX), and EMCORE Corporation (NASDAQ:EMKR). Let’s examine why investors are buying these stocks at enhanced prices and see what the hedge funds in our database think of each of them.
At Insider Monkey, we track around 785 hedge funds and institutional investors. Through extensive backtests, we have determined that imitating some of the stocks that these investors are collectively bullish on, can help retail investors generate double digits of alpha per year. The key is to focus on the small-cap picks of these funds, which are usually less followed by the broader market and allow for larger price inefficiencies (see the details here).
Cowen & Co Pounds the Table on Micron
Micron Technology, Inc. (NASDAQ:MU) is 5% higher today due to bullish commentary from Cowen & Co.’s Tim Arcuri, who argued that Micron is in prime position to benefit from the rise of ‘hyperscale’ computing and cloud computing. Mr. Arcuri had this to say in regards to his bullish thesis:
“New big data and scale-out computing use cases are requiring workloads to “live” in a server with less reliance on traditional external storage arrays. In part due to its partnership w/INTC, MU remains uniquely positioned as a solutions provider because it is the only company producing all flavors of solid state memory – DRAM, NAND and storage class 3D XPoint. We continue to feel that investors under-appreciate MU’s opportunity around 3DXP, which we feel could add ~ $0.30 to C2018 EPS and grow materially from there.”
Arcuri has an ‘Outperform’ rating and a $13 price target on the stock, which suggests 21% upside. 64 elite funds that we track likely also have an ‘Outperform’ opinion on Micron Technology, Inc. (NASDAQ:MU), as they were all long stock at the end of December.
Value Investors Snap up Shares of a Social Media Giant
Twitter Inc (NYSE:TWTR) shares are 3.8% higher today as value investors snap up the stock. Given the advances in natural language processing and the number of e-commerce transactions that can be made through the chatbot conversation interface, some investors are snapping up Twitter in hopes that the company’s management can monetize its audience with chatbots in the future. Twitter has hundreds of millions of monthly users but has struggled to turn a profit from its audience.
Hedge fund sentiment in the stock turned more bullish in the fourth quarter after sinking throughout much of 2015. A total of 30 funds reported stakes in the company worth $320.88 million (representing 2.00% of the float) as of the end of December, up from 27 funds with $248.32 million in Twitter shares at the end of September. Dmitry Balyasny‘s Balyasny Asset Management owned 1.43 million shares of Twitter Inc (NYSE:TWTR) the end of 2015.
On the next page, we dig into the big moves being made today by GoPro Inc, CSX Corporation, and EMCORE Corporation.
GoPro Hires a Design Talent
GoPro Inc (NASDAQ:GPRO) shares have surged by more than 13% today after the company reportedly hired senior Apple Inc. (NASDAQ:AAPL)
designer Danny Coster, who will head GoPro’s new hardware design group. Coster has over 500 design patents and worked closely with Jony Ive on the design work for the original iMac. With today’s rally, some investors are hoping that Coster can work his design magic on GoPro products and potentially increase GoPro’s demand and profits. 18 elite funds in our system held shares of GoPro Inc (NASDAQ:GPRO) at the end of the fourth quarter, down by seven funds from the previous quarter.
Railroad Reports Mixed Earnings, Investors Applaud
CSX Corporation (NASDAQ:CSX) is 4% in the green this afternoon despite reporting mixed first quarter earnings. For the time period, CSX earned $0.37 per share on revenue of $2.62 billion, which met EPS expectations of $0.37, and topped revenue estimates of $2.56 billion. CSX’s sales dropped by 13.5% year-over-year due to lower shipping volumes and the company is guiding for fiscal year 2016 earnings per share to decline year-over-year due to the weak coal sector. Shares of the railroad rallied today because the market was expecting even worse results than analysts’ expectations. Cliff Asness’ AQR Capital Management was among 45 elite funds that held shares of CSX Corporation (NASDAQ:CSX) at the end of the fourth quarter.
Favorable Ruling Sends EMCORE Higher
EMCORE Corporation (NASDAQ:EMKR) is 14% higher due to a favorable court ruling. In September 2014, Japan’s Sumitomo Electric Industries filed for arbitration against EMCORE, seeking $47.5 million for various reasons related to a sale of EMCORE assets to Sumitomo in May of 2012. Yesterday, a three member arbitration panel rejected Sumitomo Electric’s claims and ruled that EMCORE is entitled to collect $1.9 million in escrow and recover over $2.5 million in fees and costs, a noteworthy result for the micro-cap company. 14 funds in our database held 16.4% of EMCORE Corporation (NASDAQ:EMKR)’s float at the end of December. As with all micro-caps, investors should do their due-diligence before making any investment decision.