Technology companies Tripadvisor Inc (NASDAQ:TRIP), and SanDisk Corporation (NASDAQ:SNDK), along with gold producers Barrick Gold Corporation (USA) (NYSE:ABX), Yamana Gold Inc. (USA) (NYSE:AUY), and Gold Fields Limited (ADR) (NYSE:GFI) are trending for various reasons on Wednesday. Given each stocks’ abnormally high volume and their strong rallies, let’s take a closer look at the upside drivers and examine notable hedge fund sentiment toward the stocks if any.
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 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 more than 102% over the last 37 months and outperformed the S&P 500 ETF (SPY) by 53 percentage points (see more details here).
Tripadvisor Inc (NASDAQ:TRIP) is up by 18.6%, after the company made an instant booking partnership with Priceline Group Inc (NASDAQ:PCLN), in which some Priceline brands (with Booking.com being the first) will participate in TripAdvisors instant booking platform by listing their inventory. Although the financial details weren’t released, Tripadvisor will presumably come out ahead from the inventory listed/sold. TripAdvisor has been a long time partner of Priceline and the deal will increase revenues and profits for Tripadvisor in the long run. If executed successfully, Tripadvisor’s profits for next year should come in higher than previous analyst estimates. Tripadvisor’s Shares are up 5.6% year to date. According to our data, hedge funds were bullish on Tripadvisor Inc (NASDAQ:TRIP) in the second quarter. A total of 40 funds (of the 730 that we track) reported stakes worth $1.24 billion (representing 9.90% of the float) in the last round of 13F filings, versus 37 funds and $1.16 billion a quarter earlier.
SanDisk Corporation (NASDAQ:SNDK) is up 13% after Bloomberg reported the company is working with an investment bank on a potential sale. Micron Technology, Inc. (NASDAQ:MU) and Western Digital Corp (NASDAQ:WDC) could be acquirers, according to Bloomberg citing people familiar with the matter. Any potential sale would have to come at a substantial premium from the unaffected price. There has been a wave of M&A in the computer parts segment as the era of cheap debt comes to an end. Chip and memory makers are consolidating to increase their pricing power and solve the oversupply problem as the PC undergoes its secular decline. The computer parts industry reminded us of the airline industry several years ago, where many companies merged, increased their utilization rates, and their stocks rallied.
In the next page, we analyze why gold stocks are up.