While all three indices in the red today amid a reported slowdown of the US services sector growth, shares of Wells Fargo & Co (NYSE:WFC), Alibaba Group Holding Ltd (NYSE:BABA), Intel Corporation (NASDAQ:INTC), General Motors Company (NYSE:GM) and Ardmore Shipping Corp (NYSE:ASC) are underperforming the market. In the following article, we will examine why investors are selling shares and examine the relevant hedge fund sentiment towards these stocks.
We believe that imitating hedge funds and other large institutional investors can be helpful in identifying stocks capable of outperforming the broader market. Through extensive research that covered portfolios of several hundred large investors between 1999 and 2012, we determined that following the small-cap stocks that large money managers are collectively bullish on, can generate monthly returns nearly 1.0 percentage points above the market (see more details here).
First up is Wells Fargo & Co (NYSE:WFC), whose stock fell about 3% on news that it will pay a penalty of $1.2 billion to resolve the problems generated by bad and risky loans backed by the Federal Housing Administration. Those problems were caused because of little compliance with FHA requirements. Other large banks, like Bank of America Corp (NYSE:BAC) and JPMorgan Chase & Co. (NYSE:JPM), are also involved in similar issues.
During the third quarter, Wells Fargo & Co (NYSE:WFC) registered a decrease in popularity among the funds that we track, with 85 investors holding long positions at the end of September amassing 11.7% of the float, versus 91 funds a quarter earlier. Among them, Warren Buffett‘s Berkshire Hathaway was the largest shareholder, reporting ownership of 470.3 million shares in its last 13F filing.
Next up is Alibaba Group Holding Ltd (NYSE:BABA), whose stock is down more than 3.5% amid weak manufacturing data from China. The country’s purchasing managers’ index amounted to 49.4 in January, which represents the lowest point since August 2012 and was below the expectations of 49.6.
Alibaba Group Holding Ltd (NYSE:BABA) lost popularity in the third quarter of 2015, as out of the 730 funds that we track, 60 funds held shares of the company on September 30, amassing 2.6% of the float, down from 85 funds on June 30. Boykin Curry’s Eagle Capital Management was the largest shareholder of Alibaba in our database, with 8.1 million shares valued at almost $476.4 million at the end of September.