Shares of Freeport-McMoRan Inc (NYSE:FCX), Qiagen NV (NASDAQ:QGEN), McKesson Corporation (NYSE:MCK), and bluebird bio Inc (NASDAQ:BLUE) are deep in the red on Monday as investors cut their stakes in each stock due to varying catalysts. In this article, we’ll take a closer look at why investors are selling. Given that Insider Monkey has done a lot of research into what the smart money likes and doesn’t like, we’ll also analyze relevant hedge fund sentiment towards the stocks.
Why do we track hedge fund activity? From one point of view we can argue that hedge funds are consistently underperforming when it comes to net returns over the last three years, when compared to the S&P 500. But that doesn’t mean that we should completely neglect their activity. There are various reasons behind the low hedge fund returns. Our research indicated that hedge funds’ long positions actually beat the market. In our back-tests covering the 1999-2012 period hedge funds’ top small-cap stocks edged the S&P 500 index by double digits annually (see the details here).
With the Shanghai index off by 5% overnight and concerns of a Chinese slowdown persisting, commodity prices are substantially lower on Monday, as copper futures breached the $2 mark to trade at $1.97 per pound and WTI futures trending 3% lower to trade at $32 per barrel. Seeing as Freeport-McMoRan Inc (NYSE:FCX) depends on copper and crude for a substantial part of its cash flow, many investors sold off the stock, causing it to fall by almost 20% in morning trading.
Smart money sentiment for Freeport-McMoRan Inc (NYSE:FCX) has been relatively stable, with the number of investors among those that we track which held the stock rising by three to 44 by the end of September. Among the funds establishing new positions in it during the third quarter was Carl Icahn‘s Icahn Capital LP, with a new stake of 100.0 million shares. With China’s stock market undergoing wild daily swings, look for Freeport and other commodity producers’ stocks to remain volatile.
In other news, Qiagen NV (NASDAQ:QGEN) shares are almost 11% in the red after the company announced its preliminary full year 2015 results and provided its 2016 outlook. Because of a disappointing fourth quarter and the strong U.S dollar, the company expects 2015 adjusted EPS to be $1.05-to-$1.06 in actual terms and $1.13-to-$1.14 under constant exchange rate terms, compared to its previous guidance of $1.16 under constant exchange rate assumptions. CEO Peer M. Schatz said:
“Our anticipated results for the fourth quarter of 2015 are disappointing given the shortfall against our expectations for more improvements in adjusted net sales and adjusted earnings per share compared to the same period in 2014. This performance was hampered by factors that included volatility in the timing of revenues from the growing portfolio of companion diagnostic partnerships as well as lower revenues from instruments, even though we exceeded our target for new placements of QIAsymphony automation systems.”
Qiagen NV (NASDAQ:QGEN) does expect its sales and earnings to rise by around 6% in 2016 (assuming FX rates don’t change), however.
On the next page, we examine the factors dragging down McKesson Corporation and bluebird bio Inc.