The bull market for crude oil is alive and well, as WTI futures have now rallied above the $44 per barrel mark. Perhaps taking a cue from crude, the S&P 500 and Dow Jones are also well in the green. Among the stocks leading the advance are Bloomin’ Brands Inc (NASDAQ:BLMN), Penske Automotive Group, Inc. (NYSE:PAG), Ocean Rig UDW Inc (NASDAQ:ORIG), Sonic Automotive Inc (NYSE:SAH), and Ethan Allen Interiors Inc. (NYSE:ETH). Let’s take a closer look at why investors are piling into each company’s shares and analyze how hedge funds are positioned in the five stocks.
We believe that imitating hedge funds and other large institutional investors can be helpful in identifying stocks capable of outperforming the broader market. Through extensive research that covered the portfolios of several hundred large investors between 1999 and 2012, we determined that following the small-cap stocks that large money managers are collectively bullish on can generate monthly returns nearly 1.0 percentage point above the market (see the details here).
Bloomin’ Brands Surges Despite Earnings Miss
Bloomin’ Brands Inc (NASDAQ:BLMN) shares have surged by 8.75% despite the fact that the company reported a soft first quarter. For the January-to-March period, Bloomin’ Brands earned $0.47 per share on sales of $1.16 billion, missing the consensus estimates by $0.03 per share and $10 million, respectively. Sales dropped by 3.3% year-over-year, as Bloomin’s U.S division saw comparable-store sales for company-owned restaurants decline by 1.5% year-over-year. Perhaps fueling today’s rally is the steady guidance that was offered. Management reaffirmed its full year guidance, including positive combined U.S comparable-store sales and adjusted diluted EPS growth of a minimum of 10%. Management expects better results in the back half of the year. Bloomin’ Brands Inc (NASDAQ:BLMN) was in 22 elite hedge funds’ portfolios at the end of December, out of the investment vehicles that Insider Monkey tracks. Those 22 funds held 14.1% of Bloomin’ Brands’ float.
Earnings Drive Penske’s Stock Higher
Penske Automotive Group, Inc. (NYSE:PAG) reported first quarter earnings of $0.90 per share on sales of $4.82 billion, slightly beating estimates of $0.88 per share in earnings on $4.79 billion in revenue. Sales rose by 7.6% year-over-year, while same-store retail revenue rose by 2.5% year-over-year. EBITDA inched up by 4.7% year-over-year to $157.6 million. Chairman Roger S. Penske discussed the record results in a press release:
“The resiliency of the U.S. and U.K. automotive markets and a solid performance from our truck dealership operations drove Penske Automotive to another quarter of record results. We believe the diversification provided by our business model continues to reward our shareholders. Further, I am particularly pleased with the 50-basis-point improvement of selling, general and administrative expenses as a percent of gross profit and gross profit flow-through of greater than 30% in the quarter.”
Jim Simons‘ Renaissance Technologies established a new position of 245,300 shares in Penske Automotive Group, Inc. (NYSE:PAG) in the fourth quarter. Shares are 8% higher in afternoon trading.
On the next page we examine the latest happenings concerning Ocean Rig UDW Inc, Sonic Automotive Inc, and Ethan Allen Interiors Inc.
Ocean Rig Higher on Follow-On Momentum
Ocean Rig UDW Inc (NASDAQ:ORIG) is over one-fifth higher today as momentum traders buy on yesterday’s news that the company agreed to acquire an ultra-deepwater drillship for less than one-tenth of its build price. Also helping today’s rally is the fact that crude prices have rallied by another 3%. If crude prices can sustain their rally for another $20 per barrel in gains, day-rates and demand for deepwater drillships will rise substantially. The number of shareholders of Ocean Rig UDW Inc (NASDAQ:ORIG) among the investors in our system fell by three during the fourth quarter to 12 by the end of December. Those 12 funds owned 19.5% of Ocean Rig’s float.
Shareholders Applaud Sonic Automotive’s Latest Quarterly Results
Sonic Automotive Inc (NYSE:SAH) shares have rallied by 15% after the company reported its latest financial results. For the first quarter, Sonic Automotive earned $0.39 per share on sales of $2.23 billion, meeting earnings estimates but falling short of top-line expectations by $90 million. Although the company’s new vehicle same-store sales inched lower by 2.1% year-over-year, Sonic’s used vehicle same-store sales rose by 2.3%. Gross margin rose by 40 basis points to 15.4%. The company maintains its guidance of adjusted diluted EPS from continuing operations of $2.07-to-$2.17 per share for 2016. The number of top funds that we track who held shares of Sonic Automotive Inc (NYSE:SAH) fell to 12 from 20 during the last quarter of 2015.
Ethan Allen Interiors Turns in Excellent Quarter
Ethan Allen Interiors Inc. (NYSE:ETH) did better than the consensus for its third quarter of fiscal year 2016, with EPS of $0.34 on sales of $190.6 million, beating analysts’ estimates by $0.04 per share and $7.56 million respectively. Retail net sales rose by 17.5%, driven by a comparable-store net sales increase of 18.6% year-over-year. Total revenue rose by 10% year-over-year. CEO Farooq Kathwari expanded on the results in a press release:
“The operating leverage of our vertically integrated structure resulted in our adjusted operating earnings increasing 55.0%. Adjusted earnings per share increased by 88.9%, which was also benefited by lower interest expense.” Mr. Kathwari continued, “We are making very good progress with repositioning our product offerings, our interior design network, making technology enhancements and improvements in our manufacturing, sourcing and logistics. We remain cautiously optimistic.”
Ethan Allen Interiors Inc. (NYSE:ETH) shares are 11% higher on the earnings report. That’s sure to make the 15 funds in our system who owned shares of Ethan Allen Interiors at the end of December happy.