Why Apple, Hershey, Mondelez, and Two More Are Trending

It’s a flat day on Wall Street as the Dow is down 20 points and the S&P is off by just 0.03%.

Among the stocks showing more volatility than the broader indexes are Apple Inc. (NASDAQ:AAPL), Hershey Co (NYSE:HSY), Mondelez International Inc (NASDAQ:MDLZ), DSW Inc. (NYSE:DSW), and McDonald’s Corporation (NYSE:MCD). Let’s take a closer look at why each stock is trending and see what the smart money investors tracked by Insider Monkey think about the companies in question.

While there are many metrics that investors can assess in the investment process, the hedge fund sentiment is something that is often overlooked. However, hedge funds and other institutional investors allocate significant resources while making their bets and their long-term focus makes them the perfect investors to emulate. This is supported by our research, which determined that following the small-cap stocks that hedge funds are collectively bullish on can help a smaller investor to beat the S&P 500 by around 95 basis points per month (see the details here).

Apple Gets a Big Tax Bill

Apple Inc. (NASDAQ:AAPL)’s shares have inched down by 0.66% in morning trading after the European Commission ordered the government of Ireland to charge the tech company up to 13 billion euros or $14.5 billion in back taxes plus interest for using an illegal scheme to lower its overall tax rate in Europe. The EC said in a statement:

“As a result of the allocation method endorsed in the tax rulings, Apple only paid an effective corporate tax rate that declined from 1% in 2003 to 0.005% in 2014 on the profits of Apple Sales International. This selective tax treatment of Apple in Ireland is illegal under EU state aid rules, because it gives Apple a significant advantage over other businesses that are subject to the same national taxation rules. The Commission can order recovery of illegal state aid for a ten-year period preceding the Commission’s first request for information in 2013. Ireland must now recover the unpaid taxes in Ireland from Apple for the years 2003 to 2014 of up to €13 billion, plus interest.”

Ireland benefits from the lower taxes by garnering more international business. Both Apple Inc. (NASDAQ:AAPL) and Ireland have said they will appeal the commission’s decision. Given the U.S. government has adamantly sided with Apple and other American multi-nationals on the issue, it remains to be seen whether the European Commission will successfully get Apple to pay such a big sum. A total of 116 funds from our database had a bullish position in Apple Inc. (NASDAQ:AAPL) at the end of June, down by 36 funds from the previous quarter.

DSW Reports Earnings 

DSW Inc. (NYSE:DSW)’s stock has retreated by around 8% after the company reported second-quarter EPS of $0.35 on revenue of $658.94 million, beating estimates by $0.05 per share and $1.41 million, respectively. For the time period, revenue grew by 5.1% year-over-year as the 31-unit increase in store count offset the 1.2% year-over-year decline in comparable sales. For the full year, DSW’s management expects EPS of $1.32 to $1.42. Heading into the third quarter 16 of the funds we track had a bullish position in DSW Inc. (NYSE:DSW).

On the next page, we find out why traders are talking about Hershey, Mondelez, and McDonald’s Corporation.

Hershey To Remain Independent

Hershey Co (NYSE:HSY) shares are more than 11% in the red today after Mondelez International Inc (NASDAQ:MDLZ) announced that it is no longer pursuing a combination with Hershey. Mondelez’s management will instead focus on its plan to deliver sustainable top-line growth and significant margin expansion in the coming years. Mondelez previously bid $107 per share for Hershey, only to see its offer be unanimously rejected by Hershey’s board of directors. Jim Simons’ Renaissance Technologies reported a stake of over 1.5 million shares in Hershey Co (NYSE:HSY) as of the end of June, while Bill Ackman’s Pershing Square owns almost 23 million shares of Mondelez International Inc (NASDAQ:MDLZ), according to its latest 13F filing.

Analyst Upgrade at McDonald’s 

McDonald’s Corporation (NYSE:MCD) is in the spotlight today after analysts at Baird upgraded shares of the restaurant stock to ‘Outperform’ from ‘Neutral’ and assigned a 12-month price target of $128 per share. Given the stock’s slide from its 52 week high of $131.96, the Baird analysts see the risk-reward of going long McDonald’s as favorable. Although McDonald’s same-store sales aren’t growing as fast as they did several quarters ago, the stock remains a good long-term holding given the company’s wide moat, reasonable forward P/E of 18.8 and dividend yield of 3.08%. Hedge funds were a little less optimistic on McDonald’s in the second quarter. Of the around 750 funds we track, 63 investors owned shares of McDonald’s Corporation (NYSE:MCD) at the end of June, down by 20 from the previous quarter.

Disclosure: none