What Is Going On With These Falling Stocks?

It seems to be opposite day today, as all three indexes are in the red, but oil is gaining ground. Among the stocks that are bleeding are Regions Financial Corp (NYSE:RF), Advanced Micro Devices, Inc. (NASDAQ:AMD), Mondelez International Inc (NASDAQ:MDLZ), Swift Transportation Co (NYSE:SWFT), and Celadon Group, Inc. (NYSE:CGI), each of which is down on the back of different developments that we are going to take a closer look at.

In addition, let’s analyze hedge fund sentiment towards these stocks. Why do we pay attention to hedge fund sentiment? Most investors ignore hedge funds’ moves because as a group their average net returns trailed the market since 2008 by a large margin. Unfortunately, most investors don’t realize that hedge funds are hedged and they also charge an arm and a leg, so they are likely to underperform the market in a bull market. We ignore their short positions and by imitating hedge funds’ stock picks independently, we don’t have to pay them a dime. Our research has shown that hedge funds’ long stock picks generate strong risk adjusted returns. For instance the 15 most popular small-cap stocks outperformed the S&P 500 Index by an average of 95 basis points per month in our back-tests spanning the 1999-2012 period. We have been tracking the performance of these stocks in real-time since the end of August 2012. After all, things change and we need to verify that back-test results aren’t just a statistical fluke. We weren’t proven wrong. These 15 stocks managed to return 102% over the last 37 months and outperformed the S&P 500 Index by 53 percentage points (see the details here).

Regions Financial Corp (NYSE:RF) is down by more than 2% as the stock gives back some of its pre-Federal Reserve interest rate gains. Although the Federal Reserve increased the short term interest rate by 0.25 percentage points this week, it has also hinted that interest rates will likely be low for a long time, meaning Regions Financial Corp (NYSE:RF)’s net interest margin won’t increase substantially all at once. Rising earnings and returns on equity will be a slow process (although the long term future for the bank is certainly better with higher rates).

Moving on, Advanced Micro Devices, Inc. (NASDAQ:AMD) shares have retreated by 2.9% as some investors take profits in the stock’s over 50% rally since late August. Although the sentiment around the stock has improved, Advanced Micro Devices, Inc. (NASDAQ:AMD) still faces an uphill climb against established industry giants. Analysts also expect the company to lose $0.28 per share next year. Bulls hope the company increases its scale and cuts its costs. Cliff Asness’ AQR Capital Management owned 1.7 million shares at the end of September.

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On the next page, we examine Mondelez International Inc, Swift Transportation Co, and Celadon Group Inc.

Shares of Mondelez International Inc (NASDAQ:MDLZ) are 2.5% in the red as the indexes sell off. Given the recent Federal Reserve interest rate hike, investors are a little bit cautious on Mondelez International Inc (NASDAQ:MDLZ), as the company has substantial international operations which will be less profitable if the dollar continues to strengthen. Shares also trade at 21.83 times forward earnings, higher than the average of the S&P 500. Nevertheless, the smart money is bullish as 69 funds from our database owned shares of Mondelez on September 30, up from 20 a quarter earlier. Among these investors are Bill Ackman’s Pershing Square and AQR Capital Management.

Investors aren’t too happy with Swift Transportation Co (NYSE:SWFT) and Celadon Group, Inc. (NYSE:CGI) today, as the values of the stocks are off by 7.55% and 11.7%, respectively. Investors are selling Swift Transportation Co (NYSE:SWFT) and Celadon Group, Inc. (NYSE:CGI) after their industry peer Knight Transportation (NYSE:KNX) cut its fourth-quarter earnings guidance to $0.31-$0.33 per share, down from its previous guidance of $0.36-$0.38 per share, mainly because of fewer non-contracts and lower revenue per total mile. Investors worry that Swift and Celadon could experience the same type of unfavorable trends and report lower than expected quarterly results. A total of 14 funds held shares of Celadon and 38 funds were long Swift at the end of September.

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Disclosure: None