Why Are Investors Paying More For These 4 Stocks Today?

Pandora Media Inc. (NYSE:P), KaloBios Pharmaceuticals Inc. (NASDAQ:KBIO), American Capital Ltd. (NASDAQ:ACAS) and Deere & Co. (NYSE:DE) are enjoying a positive run along with the market today heading into the Thanksgiving holiday, with the Dow Jones Industrial Average up by 0.09% and the S&P 500 up 0.03%. In addition to studying the latest news concerning these stocks, we’ll also take a look at the hedge fund sentiment towards them.

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 have 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 38 months and outperformed the S&P 500 Index by 53 percentage points (see the details here).

Pandora Media Inc. (NYSE:P) has risen by 4.92% following an update to the company’s “Webcasting IV” rate setting proceeding, which will determine rates for the period of 2016 to 2020. The Register of Copyrights has concluded that it cannot provide an opinion as to the question posed by the Copyright Royalty Board as to whether or not that board may adopt rates and terms for webcasting that distinguish among different types or categories of licensors. The Register concluded that the question posed was “a theoretical one in that the Register is unable to discern how a written decision at this juncture could substantively impact the conduct or outcome of this proceeding.” Founded in 2000, Pandora Media Inc. (NYSE:P) is looking forward to a positive decision in December to create a “uniform rate structure for all musicians.”

Out of 730 funds in our database, 36 funds held 27.60% or approximately $1.25 billion worth of Pandora’s outstanding stock through the end of September. Eminence Capital, managed by Ricky Sandler, holds 7.0 million shares of Pandora valued at $149.9 million.

KaloBios Pharmaceuticals Inc. (NASDAQ:KBIO) shares have skyrocketed by 46.74%, re-engaging their torrid run of last week after a brief stumble this week. The company received a notice from the NASDAQ Stock Market that it is not in compliance with a listing requirement.

The stock exchange said KaloBios failed to register its quarterly filing on Form 10-Q with the Securities and Exchange Commission. KaloBios Pharmaceuticals Inc. (NASDAQ:KBIO) has 60 days from the November 17 notification to submit a plan to the NASDAQ. In response, the biopharmaceutical company said it will submit the filing with the SEC and submit a compliance plan with the stock exchange on or prior to January 16, 2016. However, there is no assurance that KaloBios will file within the date required or that the NASDAQ will extend the submission timeframe. The company may also file an appeal if the NASDAQ does not accept the compliance plan, according to a Form 8-K filed on November 23.

By the end of the third-quarter of 2015, one hedge fund in our database held 3.30% of the outstanding stock of KaloBios.That firm was Renaissance Technologies, founded by Jim Simons, while held $250,000 of KaloBios’ outstanding stock at the end of September.

Private equity firm and global asset manager American Capital Ltd. (NASDAQ:ACAS) has jumped up by 7.55% following its decision to undergo a “full strategic review of all alternatives.” The company retained Goldman Sachs & Co. and Credit Suisse Securities (USA) LLC to execute the review, which includes a potential sale of the company, or all or a portion of its business segments.

“We have generated a 16% annualized growth rate in both our book value and price per share over the five years ended September 30, 2015,” American Capital Chairman and CEO Malon Wilkus said. “Nonetheless, we continue to trade at a meaningful discount to our book value, even as we progress with our plans for the spin off, which is intended to unlock shareholder value.  Therefore, I am fully supportive of this strategic review, which will allow us to realize the optimal value for our shareholders.”

In addition, American Capital Ltd. (NASDAQ:ACAS)’s board of directors approved the expansion of its current stock buyback program to a range of $600 million-to-$1 billion from the prior range of $300 million-to-$600 million. That program, which was initiated in the third quarter, will be completed by June 30, 2016.

36 funds in our database held a total of 33.10% of American Capital shares through the end of September.  The top investor from Insider Monkey’s database was Steven Tananbaum of Goldentree Asset Management, which held 4.9 million shares of American Capital valued at $59 million.

Deere & Company (NYSE:DE), the maker of parts and provider of services for those who are “linked to the land,” has risen by 2.95% following strong profits in its latest earnings report amid global market weakness.

Net income attributable to the company was $351.2 million, or $1.08 per share, for the fourth quarter of fiscal year 2015, which ended October 31, compared with $649.2 million, or $1.83 per share, for the same period of fiscal year 2014. Meanwhile, net sales from the worldwide equipment operations of Deere & Company (NYSE:DE) declined by 26% for the quarter and 22% for the full fiscal year compared with the same periods in fiscal year 2014.

“Sales and earnings for the year were the sixth-highest in company history, a notable achievement in light of the challenging market conditions we experienced. The company’s performance benefited from the adept execution of our business plans and disciplined cost management,” Deere & Co. Chairman and CEO Samuel Allen said. “As a result, Deere remains well-positioned to serve its customers while continuing to make investments in quality and innovation that are designed to drive growth in the future.”

35 out of 730 funds which Insider Monkey tracks held a combined 10.90% of the company’s outstanding stock. Warren Buffett of Berkshire Hathaway holds 17 million shares of the company valued at $1.26 billion.

Disclosure: None