Why Are Investors Piling Into These Four Stocks?

Although it’s Friday the 13th, shareholders of Mylan NV (NASDAQ:MYL), SouFun Holdings Ltd (NYSE:SFUN), Lipocine Inc (NASDAQ:LPCN), and Syngenta AG (ADR) (NYSE:SYT) are certainly not scared as the share prices of each stock is up substantially. Let’s take a closer look at why investors are buying.

In addition, let’s also examine what the smart money thinks of these stocks. 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. 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 37 months and outperformed the S&P 500 Index by 53 percentage points (see the details here).

Shareholders of Mylan NV (NASDAQ:MYL) are breathing a sigh of relief as their company failed to acquire Perrigo Company plc Ordinary Shares (NYSE:PRGO) in a hostile bid. Mylan originally offered $75 in cash per share in addition to 2.3 Mylan shares for each Perrigo share, but the company failed to secure the votes necessary to get the deal done. Perrigo shareholders apparently thought Mylan’s offer was too low. Shares of Mylan NV (NASDAQ:MYL) are up 11% on the news. Of the around 730 elite funds we track, 92 funds owned $4.59 billion of Mylan NV (NASDAQ:MYL)’s shares at the end of the second quarter, accounting for 13.80% of the float.

SouFun Holdings Ltd (NYSE:SFUN) rallied by over 12% in morning trading after the MSCI declared the stock will be included in the MSCI Emerging Markets Index from December 1. The index inclusion will force many mutual fund managers to buy the stock. SouFun Holdings Ltd (NYSE:SFUN) shares have been volatile this year, having rallied to $10 per share in mid-June before falling to under $5 in late August. Because of the rally in the Shanghai index and today’s news, shares are now above $8 again.

On the next page, we examine why Lipocine, Aoxing, and Syngenta are up.

Shares of Lipocine Inc (NASDAQ:LPCN) are up by over 27% on strong volume after the FDA assigned a PDUFA (Prescription Drug User Fee Act) date of June 28, 2016 for the company’s leading drug candidate LPCN 1021, a potential oral testosterone product for testosterone replacement therapy in adult males for conditions associated with an absence or deficiency of endogenous testosterone (‘hypogonadism’). The FDA communication letter did not mention any need of an advisory committee for advice on the NDA for LPCN 1021, which can be construed as an optimistic sign. Given an average of half a million prescriptions are dispensed for TRT a month and many of the topical products for TRT have black box warnings, some investors are bullish on the company. According to our database, 12 funds owned $47.9 million of Lipocine Inc (NASDAQ:LPCN)’s shares on June 30, accounting for 30.70% of the float.

Last but not least, Syngenta AG (ADR) (NYSE:SYT) shares are up 6% after Bloomberg published a report stating ChemChina is interested in buying the company. According to the article, ChemChina made an offer of around 449 Swiss francs per share, valuing the company at around $42 billion. Syngenta turned down the offer, however, as management thinks the offer is too low given the regulatory risks. Although a deal between the two companies isn’t imminent, the two are still talking and a deal could potentially be made within several weeks. Syngenta is also considering other M&A options as well, including talking to other potential acquirers.

Disclosure:None