The US stock market opened higher amid final third-quarter GDP data and weaker-than-expected existing home sales in November. Nevertheless, as the market remained in the green territory, several stocks opened lower and registered considerable losses in intraday trading. In this article we are going to take a look at some of the top losers on Tuesday and the developments behind their declines. Namely, we are going to discuss NetApp Inc. (NASDAQ:NTAP), Sunedison Inc (NYSE:SUNE), TerraForm Global Inc (NASDAQ:GLBL), ReneSola Ltd. (ADR) (NYSE:SOL), and Knoll Inc (NYSE:KNL).
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 102% over the last 39 months and outperformed the S&P 500 Index by 53 percentage points (see the details here).
Leading the way is NetApp Inc. (NASDAQ:NTAP), whose stock has fallen by 5% in afternoon trading after the analysts at RBC Capital downgraded the computer storage and data management company to ‘Sector Perform’ from ‘Outperform’ and lowered the price target to $28 from $38. The analysts cited the lack of near-term earnings following the recently-announced acquisition of SolidFire and the less possibility of a takeover in the future as reasons for the downgrade. Similarly, analysts at Macquarie and Piper Jaffray have decreased their price targets to $30 and $27, respectively. The acquisition is worth $870 million, and it is expected to be materialized in the company´s fiscal fourth quarter.
Hedge fund sentiment towards NetApp Inc. (NASDAQ:NTAP) remained steady, as the number of hedge funds long the stock remained unchanged at 26 at the end of the third quarter, and these funds amassed 3.60% of the company’s outstanding stock. Jim Simons’ Renaissance Technologies is the largest shareholder of NetApp Inc, owning 1.63 million shares valued at $48.4 million as of the end of September.
It hasn’t been a good day for Sunedison Inc (NYSE:SUNE) investors, as the stock is down by more than 20% today after reports that activist investor David Tepper’s Appaloosa Management has requested the right to inspect the books of TerraForm Power Inc (NASDAQ:TERP), a yieldco of Sunedison, to know about management’s reorganization and acquisitions like the one of Vivint Solar Inc (NYSE:VSLR). The hedge fund, which has recently acquired a 9.5% stake in TerraForm, accuses the company of favoring Sunedison instead of its own shareholders.
Among the funds we track, Sunedison Inc (NYSE:SUNE) lost popularity during the third quarter, with a total of 73 funds reporting long positions in the company, versus 93 funds a quarter earlier. However, these funds amassed 46.80% of the company’s outstanding stock heading into the fourth quarter. David Einhorn’s Greenlight Capital reported owning 18.61 million shares of Sunedison in its latest 13F filing, having decreased its stake by 26% over the quarter.
Along with this bearish movement, shares of TerraForm Global Inc (NASDAQ:GLBL), another yieldco of Sunedison, are down today by almost 6%. Hedge funds have been more optimistic about the stock recently, with 23 hedge funds long TerraForm Global Inc (NASDAQ:GLBL) at the end of the third quarter, up from 0 funds long the stock at the close of the previous quarter.