With markets slightly in the red on Thursday, shares of F5 Networks, Inc. (NASDAQ:FFIV), Veeco Instruments Inc. (NASDAQ:VECO), Cavium Inc (NASDAQ:CAVM), HealthSouth Corp (NYSE:HLS), and Buffalo Wild Wings (NASDAQ:BWLD) stand above the crowd, plunging on the back of weak financial results. Let’s take a closer look and analyze relevant hedge fund sentiment towards each stock.
But why do we track hedge fund activity? From one point of view we can argue that hedge funds are consistently underperforming when it comes to net returns over the last three years, when compared to the S&P 500. But that doesn’t mean that we should completely neglect their activity. There are various reasons behind the low hedge fund returns. Our research indicated that hedge funds’ long positions actually beat the market. In our back-tests covering the 1999-2012 period hedge funds’ top small-cap stocks edged the S&P 500 index by double digits annually. The 15 most popular small-cap stock picks among hedge funds also bested passive index funds by around 53 percentage points over the 36 month period beginning from September 2012 (see more details here).
F5 Networks, Inc. (NASDAQ:FFIV)’s shares are off by 7.66%, after the company reported fourth-quarter (of fiscal 2015) earnings of $1.84 per share on revenues of $501.3 million (up 7.7% year-over-year), beating profit estimates by $0.10 per share, but missing revenue expectations by $5.22 million. Guidance is a bit soft, with management expecting first-quarter EPS of $1.58 – $1.61 and revenue of $480 million – $490 million, versus expectations of $1.71 and $507.8 million, respectively. Growth is slowing and shares could take a few quarters consolidating. According to our data, a total of 31 funds of the around 730 we track reported stakes worth $556.54 million (accounting for 6.40% of the float) at the end of June, up from 27 funds and $539.18 million at the end of March. Peter Rathjens, Bruce Clarke and John Campbell‘s Arrowstreet Capital owned 933,515 shares at the end of June.
Cavium Inc (NASDAQ:CAVM) fell by 4.9% after reporting third-quarter EPS of $0.38 on revenues of $105.1 million (up by 7.4% year-over-year), both in line with expectations. Investors could be selling because guidance is a bit soft, with management expecting fourth-quarter EPS to be between $0.26 and $0.30 and revenue in the range of $99 million to $102 million, versus expectations of $0.39 and $109.6 million, respectively. Hedge funds were mixed on Cavium Inc (NASDAQ:CAVM) in the time period from March 31 to June 30. Although the number of funds increased to 24 from 23, the total value of their holdings in the stock declined to $261.71 million (accounting for 6.90% of the float) from $290.2 million.
On the next page, we examine why HealthSouth Corp and Buffalo Wild Wings are down.