Although the S&P 500 is 0.30% in the red and the NASDAQ is 1.20% lower on the back of several tech giants’ disappointing earnings reports, shares of Advanced Micro Devices, Inc. (NASDAQ:AMD), Valeant Pharmaceuticals Intl Inc (NYSE:VRX), Southwestern Energy Company (NYSE:SWN), NGL Energy Partners LP (NYSE:NGL), and Skechers USA Inc (NYSE:SKX) have surged after the bell. In this article, we examine why traders are piling into each stock and analyze what hedge funds think of them too.
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).
Chinese JV Gives Advanced Micro Devices a Boost
Advanced Micro Devices, Inc. (NASDAQ:AMD) is almost a third higher today after the company reported better than expected first quarter results and announced a Chinese joint venture. For the time period between January 1 and March 31, Advanced Micro Devices lost $0.12 per share on revenue of $832 million, versus estimates of a $0.13 loss per share and sales of $818.16 million. Guidance is for revenue growth in the second quarter of 12-18% quarter-over-quarter, versus analyst estimates of 7% sequential growth. The company also disclosed that it is forming a joint venture with the Chinese firm THATIC to develop chips to serve the Chinese server market. The company gave more details on the joint venture and licensing arrangement:
“AMD licensed high-performance processor and SoC technology to a newly-created JV it has formed with THATIC (Tianjin Haiguang Advanced Technology Investment Co., Ltd.) to develop SoCs tailored to the Chinese server market that will complement AMD’s own offerings. The $293 million licensing agreement is a meaningful step in AMD’s IP monetization strategy intended to accelerate the Company’s growth and better monetize its valuable assets. Payments are contingent upon the JV achieving certain milestones. AMD also expects to receive royalty payments from the JV’s future product sales.”
Cliff Asness’ AQR Capital Management was among 16 funds from our database that held shares in Advanced Micro Devices, Inc. (NASDAQ:AMD) at the end of December.
Valeant Gets a New Boss
Valeant Pharmaceuticals Intl Inc (NYSE:VRX)’s shares are up by more than 8% in morning trading after the Dow Jones reported that the drug company is close to finishing a contract that would make Joseph Papa Valeant’s new CEO. Papa is currently the CEO of Perrigo Company plc Ordinary Shares (NYSE:PRGO), and would replace current Valeant CEO Michael Pearson. Valeant Pharmaceuticals Intl Inc (NYSE:VRX) could use a steady hand, as its stock is down substantially from its 2014 highs. Bill Ackman’s Pershing Square is one of the leading shareholders in the company.
On the next page, we examine Southwestern Energy Company, NGL Energy Partners LP, and Skechers USA Inc.Southwestern Beats on Earnings
Southwestern Energy Company (NYSE:SWN) shares have surged 15.5% on the back of a strong earnings report and higher energy prices. For its first quarter, Southwestern lost $0.08 per share on sales of $579 million, beating estimates by $0.13 per share and $48.99 million. CEO Bill Way said:
“While adjusting activity levels to align with the commodity prices, we exceeded guidance on production volumes and associated costs by continuing our laser focus on efficiency improvements. The actions we are taking to further strengthen our balance sheet, enhance operating margins and optimize cash flow will continue to provide benefits in the current environment, and will enable us to enhance shareholder value as commodity prices improve.”
Adding to today’s surge is the fact that WTI is 2.7% higher and natural gas futures are about 1% higher on the day. A total of 32 funds among those we track owned $468.82 million worth of Southwestern Energy Company (NYSE:SWN)’s shares, which accounted for 17.10% of the float on December 31, versus 38 funds and $569.33 million, respectively, a quarter earlier.
NGL Energy Partners LP Spikes on Oaktree Capital Management Investment
NGL Energy Partners LP (NYSE:NGL) shares have spiked 30% out of the gate after the company announced an investment from funds managed by Oaktree Capital Management. The investment was worth $200 million private placement of 10.75% Class A convertible preferred units and Oaktree will acquire 16.6 million units at a price of $12.03 apiece as well as 3.6 million warrants subject to various conditions. NGL’s CEO Mike Krimbill said:
“I believe this is a very positive transaction for NGL and I look forward to having Oaktree as a partner and represented on our Board. The investment by Oaktree is a strong endorsement of our business model, strategy and future growth projects. In other news, the company cut its quarterly distribution to $0.39 per unit from $0.64 per unit and trimmed its full year adjusted EBITDA guidance to $420-$430 million from the previous $450 million.”
Elite quant Jim Simons’ Renaissance Technologies was one of the top holders of NGL Energy Partners LP (NYSE:NGL) at the end of 2015.
Earnings Power Skechers’ Stock
Skechers USA Inc (NYSE:SKX)’s stock has gained 5.39% after the company turned in an excellent first quarter. For the time period between January 1 and March 31, Skechers USA posted earnings of $0.63 per share on sales of $978.8 million, beating estimates by $0.09 and $61.55 million, respectively. However, the company’s guidance for second quarter includes sales in the range of $875 million to $900 million, versus estimates of $914 million. Of the around 786 elite funds we track, 28 funds owned $342.91 million worth of Skechers USA Inc (NYSE:SKX)’s shares, which represented 7.30% of the float on December 31, versus 36 funds and $599.89 million, respectively, on September 30.