At a time when all three indexes are each up by over 0.5%, shares of Rovi Corporation (NASDAQ:ROVI), China Information Technology, Inc. – Ordinary Shares (NASDAQ:CNIT), Linn Energy LLC (NASDAQ:LINE), Teck Resources Ltd (USA) (NYSE:TCK), and Kinder Morgan Inc (NYSE:KMI) are leading the pack among the gainers. Let’s find out why.
Moreover, we will also examine relevant hedge fund sentiment toward the equities. We pay attention to hedge funds’ moves because our research has shown that hedge funds are extremely talented at picking stocks on the long side of their portfolios. It is true that hedge fund investors have been underperforming the market in recent years. However, this was mainly because hedge funds’ short stock picks lost a ton of money during the bull market that started in March 2009. Hedge fund investors also paid an arm and a leg for the services that they received. We have been tracking the performance of hedge funds’ 15 most popular small-cap stock picks in real time since the end of August 2012. These stocks have returned 102% since then and outperformed the S&P 500 Index by around 53 percentage points (see the details here). That’s why we believe it is important to pay attention to hedge fund sentiment; we also don’t like paying huge fees.
Shareholders of Rovi Corporation (NASDAQ:ROVI) are certainly happy two days before Christmas, as the value of their stock holding in Rovi has jumped 31.3% in morning trading. Investors are piling into the stock because Rovi Corporation (NASDAQ:ROVI) announced it has reached a new seven-year licensing deal with AT&T Inc. (NYSE:T) which extends existing agreements and provides the telecom with access to Rovi’s best-in-class entertainment discovery patent portfolio. Rovi’s AT&T deal makes similar deals between Rovi and Comcast and Dish more likely and decreases the probability of Rovi having to pursue expensive lawsuits against the two to collect licensing revenue. Because of the AT&T deal and its implications, the analysts at JPMorgan added Rovi to its ‘Focus List’, which is likely adding to the short squeeze. Hedge fund sentiment in Rovi has been optimistic, with the number of elite funds (among those we track) long the stock increasing by two to 22 between July and September.
Shares of China Information Technology, Inc. – Ordinary Shares (NASDAQ:CNIT) are 12% higher after the company announced that it has regained compliance with the minimum price requirement for continued listing on NASDAQ. Because China Information Technology’s stock price maintained a closing bid price of $1.00 per share or higher from November 27 to December 21, 2015, NASDAQ has rescinded its earlier de-listing warning. China Information Technology, Inc. – Ordinary Shares (NASDAQ:CNIT) could use some additional good news, however, as shares of the company are off by almost 50% year-to-date.
On the next page, we examine Teck Resources Ltd (USA), Linn Energy LLC, and Kinder Morgan Inc.Investors are piling into Teck Resources Ltd (USA) (NYSE:TCK) today and sending shares up over 10%, because copper and other base metal futures are rising. Although base metal commodities are, for the most part, still in bear territory, there is buying because the shorts are taking profits before the year draws to a close and because China recently announced a new series of reforms that should quicken the country’s structural adjustment process. If China recovers faster, commodity prices will too. A total of 19 elite funds were long 1.7% of Teck Resources Ltd (USA) (NYSE:TCK) as of the end of the third quarter.
In other news, Linn Energy LLC (NASDAQ:LINE) and Kinder Morgan Inc (NYSE:KMI) are up by 30% and 6% because WTI crude futures have spiked on the news that U.S. oil inventories fell 5.9 million barrels last week, versus the consensus expectation of a 0.6 million barrel build-up. The oil inventory drawdown makes the worst case we’re-running-out-of-inventory-to-store-crude scenario less likely, which means WTI trading for $20 per barrel is less probable. Given the extreme bearish sentiment, a short squeeze could reappear if crude inventories continue to fall more than expectations. A total of five elite funds were long Linn Energy LLC (NASDAQ:LINE) while 72 owned shares of Kinder Morgan Inc (NYSE:KMI) at the end of September..