Although all three indexes are in the green and crude futures are 2% higher, shares of Capital Product Partners L.P. (NASDAQ:CPLP)
, Catalyst Pharmaceuticals Inc (NASDAQ:CPRX)
, Nabors Industries Ltd. (NYSE:NBR)
, Wyndham Worldwide Corporation (NYSE:WYN)
, and Waddell & Reed Financial, Inc. (NYSE:WDR)
are each deep in the red today. In this article, we’ll analyze why traders are selling these stocks amid otherwise strong market sentiment and check relevant hedge fund sentiment to see if the smart money disagrees with the market on any of these equities.
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
Capital Product Cuts Dividend
Capital Product Partners L.P. (NASDAQ:CPLP) shares have dropped by 27% out of the gate after the company cut its quarterly dividend to $0.075 per share from the previous $0.2385 per share. The company also missed EPS estimates by $0.02, reporting first quarter earnings per share of $0.08 this morning. Sales totaled $58.05 million, up by 18.8% year-over-year, but $2.46 million below expectations. Management discussed some of the aspects of the company’s financial health in a press release:
“In the context of high capital costs and a potential decrease in revenues, one of our credit facilities has started amortizing in the first quarter of 2016, while our three other credit facilities will start amortizing in the fourth quarter of 2017. As a result, we are due to repay approximately $175.7 million of debt during the period between the first quarter of 2016 and the end of 2018. In the past, we successfully managed to extend the non-amortizing periods and maturities of our credit facilities, which is not practicable today in a cost effective manner. In light of these circumstances, the Board of the Partnership has decided to reserve approximately $14.6 million on a quarterly basis to fully provide for the debt repayments coming due in the next three years, up until the end of 2018.”
The dividend cut will help create that capital reserve that management mentioned. Within our database of 786 elite hedge funds, the smart money wasn’t that excited about Capital Product Partners L.P. (NASDAQ:CPLP), with only five of those top funds holding 1.2% of the company’s float at the end of December.
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Catalyst Halves on Regulatory Update
Catalyst Pharmaceuticals Inc (NASDAQ:CPRX) shares have halved after the company provided an update on the content of its planned re-submission of an NDA for Firdapse. According to the update, Catalyst ‘will need to submit positive results from an additional adequate and well-controlled study in patients with LEMS’. The FDA also wants several more short-term toxicology studies, which should start soon. Catalyst had $52 million in cash and cash equivalents at the end of March. 12 elite funds that we track out of 786 in total owned almost one-quarter of Catalyst Pharmaceuticals Inc (NASDAQ:CPRX)’s float at the end of December.
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On the next page we examine why Nabors Industries Ltd, Wyndham Worldwide Corporation, and Waddell & Reed Financial Inc are taking it on the chin from investors today.