Wall Street is trading in the green on Tuesday and shares of Pep Boys-Manny Moe and Jack (NYSE:PBY), Transocean LTD (NYSE:RIG), Cisco Systems, Inc. (NASDAQ:CSCO), JPMorgan Chase & Co. (NYSE:JPM) and Honeywell International Inc. (NYSE:HON) are registering considerable gains today. In this article, let’s take a look at why these stocks opened higher on Tuesday. We are also going to assess the hedge fund sentiment towards these stocks.
We pay attention to hedge funds’ moves because our research has shown that hedge funds are extremely talented at picking stocks on the long side of their portfolios. It is true that hedge fund investors have been underperforming the market in recent years. However, this was mainly because hedge funds’ short stock picks lost a ton of money during the bull market that started in March 2009. Hedge fund investors also paid an arm and a leg for the services that they received. We have been tracking the performance of hedge funds’ 15 most popular small-cap stock picks in real time since the end of August 2012. These stocks have returned 102% since then and outperformed the S&P 500 Index by around 53 percentage points (see more details here). That’s why we believe it is important to pay attention to the hedge fund sentiment; we also don’t like paying huge fees.
The first on the list is Pep Boys-Manny Moe and Jack (NYSE:PBY), whose shares are up by 8% today after Billionaire Carl Icahn, who is the second-largest shareholder (holding an 11% stake in the firm), further raised his bid for the company, topping the offer made by Bridgestone. This way, the bid is at $18.50 per share (above the $17 per share offered by Bridgestone last week) and the value of the company is a little over $1 billion. In a statement, the company said that the board accepted Icahn’s proposal as superior and plans to terminate the previous agreement with Bridgestone.
Among the funds we track, Pep Boys-Manny Moe and Jack (NYSE:PBY) gained some popularity during the third quarter, with a total of 18 funds reporting long positions in the company, versus 16 funds a quarter earlier. Moreover, these funds amassed 22.40% of the company’s outstanding stock heading into the fourth quarter. Mario Gabelli’s GAMCO Investors reported owning 6.83 million shares of Pep Boys-Manny Moe and Jack in its latest 13F filing, having decreased its stake by 3% over the quarter.
Although Transocean LTD (NYSE:RIG) fell yesterday because Shell had opted to end its Polar Pioneer contract in advance, shares have gained around 2% today. Among the funds we follow, 37 reported long positions in Transocean LTD as of the end of September, up by five funds over the quarter. Carl Icahn’s Icahn Capital is the largest shareholder of the company among the investors we follow, with 21.48 million shares valued at $277.5 million at the end of the third quarter.
On the next page we are going to discuss the news that sent higher the other three stocks.
Next on our list of morning gainers is Cisco Systems, Inc. (NASDAQ:CSCO), whose shares are up by 1.5% after a U.S. appeals court has ruled that it did not infringe a patent held by Commil USA. The resolution of the litigation, which lasted eight years, has reversed $64 million to the tech giant.
Cisco Systems registered a decrease in popularity among hedge funds, with 67 investors holding long positions versus 72 funds in the previous quarter. Donald Yacktman‘s Yacktman Asset Management is the largest shareholder with 36.11 million shares, valued at $948.0 million at the end of September, accounting for 6.2% of its 13F portfolio.
JPMorgan Chase & Co. (NYSE:JPM) shares are up by 1% as investors become more optimistic on news that some large depositors will benefit from January 2016 as the bank will increase the interest on the funds deposited. This decision follows the recent rate hike by the Federal Reserve. This strategy will also be implemented by some Canadians banks, which want to increase their U.S. deposits.
Hedge fund sentiment has stayed steady in JPMorgan Chase & Co. (NYSE:JPM), as the number of hedge funds long the stock remained unchanged at 100 at the end of the third quarter. However, these funds amassed only 3.40% of the company’s outstanding stock heading into the fourth quarter. Among those funds long the stock is Alex Snow‘s Lansdowne Partners, which owned 18,86 million shares at the end of September.
Finally, in our list of gaining assets is Honeywell International Inc. (NYSE:HON), whose shares have inched up by 1% after the company said it had received the approval to purchase Elster Group, a division of Melrose Industries. The $3.6 billion acquisition is expected to generate future growth and return capital to its shareholders.
Our data show that the company lost some popularity among the smart money investors, with the number of funds long Honeywell International Inc. (NYSE:HON) having decreased by three to 46 during the third quarter. Together they hold some 1.7% of the company’s common stock while First Eagle Investment Management is the largest shareholder, owning 2.84 million shares valued at $268.5 million as of the end of September.