It’s a relatively quiet day on Wall Street, with the three major indexes roughly flat on the day. The Dow is down by just 15 points while the S&P is less than one-tenth of a percentage point lower. Although broader market volatility is low, CARBO Ceramics Inc. (NYSE:CRR), LSI Industries, Inc. (NASDAQ:LYTS), Alliance Data Systems Corporation (NYSE:ADS), Dana Holding Corporation (NYSE:DAN), and LendingClub Corp (NYSE:LC) are all trending sharply lower. Let’s find out what is going on with these falling stocks and see how hedge funds were positioned in them as of December 31.
Our backtests that covered the period between 1999 and 2012, showed that following the 15 most popular small-caps among hedge funds can help a retail investor beat the market by an average of 95 basis points per month (see the details here).
CARBO Off Due to Idle Plants
CARBO Ceramics Inc. (NYSE:CRR) is off by 11% this morning after the company announced that it will idle the majority of production at its New Iberia, Louisiana plant, as well as the production at its facility in Toomsboro, Georgia. The company is idling production as a direct response to the low oil prices, which lowers demand for ceramic proppant. Investors are taking today’s news as a sign that the company’s earnings results might be weak. 11 funds in our system owned 9.7% of CARBO Ceramics Inc. (NYSE:CRR) shares at the end of 2015.
LSI Industries Down on Earnings
LSI Industries, Inc. (NASDAQ:LYTS) shares have retreated by 9.6% after the company reported earnings of $0.02 per share on revenue of $70.74 million for the third quarter of fiscal year 2016, which appears to have disappointed investors. Management is trying to make the company leaner by increasing efficiency and cutting costs where it can. CEO Dennis W. Wells expounded on this in a press release revealing the results:
“I am pleased that LSI was profitable in the third quarter, our seasonally weakest period of the fiscal year. However, it should have been much better. The substantial and continuous progress we have made in improving operating margins was blunted during the third quarter by the need to book an additional $1.0 million of warranty expense. This issue is being thoroughly investigated and resulted primarily from problems with LED drivers. We no longer sell the problem drivers, and we have targeted reducing our level of warranty claims as a high priority objective.”
Jim Simons‘ Renaissance Technologies was among 12 funds that we track in our database of 786 savvy investors which owned LSI Industries, Inc. (NASDAQ:LYTS) at the end of the fourth quarter.
On the next page we examine why Alliance Data Systems Corporation, Dana Holding Corporation, and LendingClub Corp are sliding today.
Traders Selling on Mixed Alliance Data Earnings Report
Alliance Data Systems Corporation (NYSE:ADS) reported a mixed first quarter, with EPS of $3.84 on revenue of $1.68 billion, beating the top-line estimate by $10 million, but missing the bottom-line estimate by $0.01 per share. Adjusted EBITDA rose by 2% year-over-year to $440 million, while core EPS rose by 5% to $3.84. The company remains on-track to deliver $16.75 in core EPS and $7.1 billion in revenue for 2016. The market was evidently expecting better results however, as Alliance Data Systems Corporation (NYSE:ADS) shares are down by 7% today. The weaker Canadian economy could have an impact on the company’s results down the road, as it has a strong presence there, though its results don’t specify how much of its revenue is generated in the country. 25 elite funds owned 2.6% of Alliance Data Systems as of the end of December.
Dana Holding Misses and Traders Sell
Dana Holding Corporation (NYSE:DAN) missed both the top and bottom-line estimates with its first quarter results, as EPS of $0.34 and sales of $1.45 billion, checked in below the estimates of $0.42 per share and $1.52 billion respectively. The company’s sales retreated by 9.9% year-over-year due to the strong dollar and lower demand in the off-highway and commercial-vehicle segments, which fell by 15.1% and 23.1% year-over-year, respectively. Full year 2016 guidance calls for sales of $5.8 billion-to-$6.0 billion, and adjusted EPS of $1.65-to-$1.75. Free cash flow is expected to be $120 million-to-$140 million. 23 funds out of the 786 that we track in our database owned 12.5% of Dana Holding Corporation (NYSE:DAN)’s float at the end of 2015.
Fintech Darling LendingClub in the Red on Loan Changes
LendingClub Corp (NYSE:LC) is 5.6% lower today after the Wall Street Journal reported that the company is beginning to charge higher-risk customers more in interest due to greater-than-expected losses on its loan book. Investors fear the move will slow growth at the financial technology company. LendingClub also announced that Sameer Gulati will be the company’s new COO. Of the 786 elite funds we track, 18 of them owned $348.04 million worth of LendingClub Corp (NYSE:LC)’s shares or 8.30% of the float on December 31, up from 15 funds with $311.11 million in holdings on September 30.