What’s the Deal With These 4 Plummeting Stocks?

After surging in the morning, major U.S stock indexes performed a repeat of yesterday’s trading activity by falling in the afternoon. Among the stocks driving these declines, we will highlight Skullcandy Inc (NASDAQ:SKUL), which was trading down more than 30.5%, as well as Ascena Retail Group Inc (NASDAQ:ASNA), Boot Barn Holdings Inc (NYSE:BOOT) and Sunedison Inc (NYSE:SUNE), all down by double digits. But, what is driving these large dips? And how do the hedge funds in our database feel about these companies? Let’s find out.

Why are we interested in the 13F filings of a select group of hedge funds? We use these filings to determine the top 15 small-cap stocks held by these elite funds based on 16 years of research that showed their top small-cap picks are much more profitable than both their large-cap stocks and the broader market as a whole; yet investors have been stuck (until now) investing in all of a hedge fund’s stocks: the good, the bad, and the ugly. Why pay fees to invest in both the best and worst ideas of a particular hedge fund when you can simply mimic the best ideas of the best fund managers on your own? These top small-cap stocks beat the S&P 500 Total Return Index by an average of nearly one percentage point per month in our backtests, which were conducted over the period of 1999 to 2012 (see more details).

The largest decliner in this list is Skullcandy Inc (NASDAQ:SKUL), which has lost more than 30.5% in Tuesday trading after management cut its fourth-quarter guidance on Monday evening. The company now expects fourth-quarter earnings of $0.20-to-$0.22 per share, down from its previous outlook of $0.38-to-$0.40 per share. Management attributed the cut to sluggish holiday sales and a shift in gross margins.

Over the third-quarter of 2015, Skullcandy Inc (NASDAQ:SKUL) witnessed a slight decline in hedge fund interest. The number of funds that disclosed long stakes in the company among those we track fell to 13 from 14 over the quarter. Steven Boyd’s Armistice Capital, the largest shareholder in our database, also trimmed its exposure by 40% over the period, to 854,000 shares worth about $4.72 million.

Another big loser today is Ascena Retail Group Inc (NASDAQ:ASNA), down about 12.7% after management announced disappointing holiday sales; consolidated comparable-store sales fell by 4% year-over-year over the holiday period. Following the poor performance, the company trimmed its second-quarter of fiscal year 2016 EPS guidance to $0.00-to-$0.03, from last month’s estimate of $0.02.

As in Skullcandy’s case, hedge fund interest in Ascena Retail Group Inc (NASDAQ:ASNA) fell during the most recent filing period. Long positions fell by two to 23 over the period, though these funds still held about 17.4% of the company’s total shares, led by Alexander Medina Seaver’s Stadium Capital Management, holding almost 5% of the outstanding stock.

On the next page, we’ll take a look into the events pushing Boot Barn Holdings Inc (NYSE:BOOT) and Sunedison Inc (NYSE:SUNE) lower today.

Boot Barn Holdings Inc (NYSE:BOOT) is also trading in the red today, down by more than 24% after the company announced mixed preliminary third-quarter results for fiscal year 2016. On the bright side, management estimates that net sales increased by 49% to approximately $194 million, driven in part by new and rebranded stores, but somewhat limited by a 2% tumble in consolidated same-store sales; the company had guided for low single-digit consolidated same-store sales growth. Finally, guidance for adjusted net income per diluted share is now expected to come in between $0.43 and $0.44, down from previous guidance of $0.47-to-$0.49.

Hedge funds also became less bullish on Boot Barn Holdings Inc (NYSE:BOOT) in the third quarter. The number of funds in our database with long positions in the company fell to 7 on September 30 from 11 on June 30. However, Chuck Royce’s Royce & Associates was pretty confident in the company, as it disclosed a 36% increase in its stake, to 812,656 shares worth almost $15 million during the third quarter.

Finally, we’ve got Sunedison Inc (NYSE:SUNE), which has lost about 16% today, after Axiom Capital Management’s Gordon Johnson questioned the company’s recent debt restructuring. On Benzinga’s PreMarket Prep show, the expert explained that, “SunEdison was very aggressive in the way they were bidding for projects. If they’re unable to sell those projects, I don’t know how much longer the equity can last.”

Sunedison Inc (NYSE:SUNE) is the worst-performing clean energy company out there right now, and it seems like many hedge funds saw it coming. Over the third quarter of 2015, the number of hedge funds in our database with long stakes in the company fell by 21.5% to 73. Even the largest shareholder in our system, David Einhorn’s Greenlight Capital, decided to reduce its stake by 26% over the period, to 18.6 million shares. It should be noted, however, that the funds that we track currently own more than 46% of the company’s total outstanding stock.

Disclosure: Javier Hasse holds no positions in any of the securities mentioned in this article.