Volatility isn’t going away on the 13th day of the year, as all three indexes are now in the red after opening up substantially higher in the morning. Among the leading losers today are American Axle & Manufact. Holdings, Inc. (NYSE:AXL), BOK Financial Corporation (NASDAQ:BOKF), Glaukos Corp (NYSE:GKOS), and Sunedison Inc (NYSE:SUNE), which are down for a variety of reasons. Let’s check out why investors are getting rid of these stocks and how top hedge funds have been trading them recently.
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 (see the details here).
American Axle & Manufact. Holdings, Inc. (NYSE:AXL) shares are deep in the red today because of weak guidance put forth by the company. For the full 2015 year, American Axle estimates that its sales were $3.9 billion, that its EBITDA margin was 14.5%-to-14.75%, and that its free cash flow came in at $185 million-to-$190 million. 2016 might be more of the same, as American Axle is targeting sales of $4 billion, an EBITDA margin of 14.5%-to-14.75%, and free cash flow of $120 million-to-$140 million for the period. Free cash flow guidance is lower because the company expects to increase capital spending to 6% of revenue compared to 5% of sales last year. The guidance numbers were evidently worse than expected, as American Axle & Manufact. Holdings, Inc. (NYSE:AXL) shares are 14% lower in trading today.
The number of elite funds with holdings in American Axle fell by three to 19 as of the latest 13F reporting period. Among the elite funds who believe in the company is Joel Greenblatt‘s Gotham Asset Management, owning a stake of 1.75 million shares.
BOK Financial Corporation (NASDAQ:BOKF) is 5.3% lower today due to a higher-than-expected provision for credit losses. Because of the energy and commodity rout last year, BOK Financial now expects its provision for credit losses to be $22.5 million versus its previous forecast of $3.5 million-to-$8.5 million for the fourth-quarter of 2015. BOK Financial Corporation (NASDAQ:BOKF) has more exposure to energy and commodities than average and expects net income for the fourth-quarter to come in at $0.87-to-$0.91 per diluted share. Hedge fund sentiment for BOK Financial has been stable, with ten elite funds owning shares at the end of the third quarter, down from 11 that were long the stock three months earlier.
On the next page we examine why Glaukos Corp and Sunedison Inc are sinking.