The markets are slightly down today with all three indices in the red, but shares of Prima BioMed Ltd (ADR) (NASDAQ:PBMD), Twitter Inc (NYSE:TWTR), WPX Energy Inc (NYSE:WPX), and Southwestern Energy Company (NYSE:SWN) are going the opposite way. So let’s take a closer look at these stocks and see what the smart money investors think about them.
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 have managed to return more than 102% since August 2012 and outperformed the S&P 500 Index by some 53 percentage points (see more details here).
The first on the list is Prima BioMed Ltd (ADR) (NASDAQ:PBMD), whose stock is well in the green by 9%, after the analysts at Roth Capital initiated a ‘Buy’ recommendation with a $6 price target on the company, giving the stock 400% upside potential, compared to the actual trading price of $1.2. Roth follows FBR & Co., which initiated coverage on the stock earlier this month, setting also a $6.00 price target with ‘Outperform’ rating.
Second in our list is Twitter Inc (NYSE:TWTR), whose shares are up by around 2% today amid the announcement that Twitter is going to restore the Politwoops, a website that saves the deleted tweets posted by politicians. The service was shut down earlier this year and the decision faced criticism in connection with political transparency. Twitter Inc (NYSE:TWTR) registered a decrease in popularity among the funds we track, with 27 investors holding long positions versus 47 funds in the June – September period, amassing around 1.4% of its outstanding stock. D.E. Shaw‘s D E Shaw is the largest shareholder of the company among the investors we follow, with 1.08 million shares valued at $29.1 million as of the end of the third quarter.
WPX Energy Inc (NYSE:WPX) is trading higher amid the announcement of the sale of its San Juan Basin gathering system to a fund managed by I Squared Capital. The transaction is for a total of $309 million, $285 of which are in cash and the remainder in capital for the buyer to expand the system. The terms of the contract permits that WPX Energy continues to operate the gathering system for two years or more. The deal is expected to be closed in the first quarter of 2016.
“The agreement increases the amount of WPX’s recent divestitures to nearly $575 million. WPX originally targeted $400-$500 million in activity for the latter half of the year,” the company said in a statement.
During the third quarter, WPX Energy Inc (NYSE:WPX) registered an increase in popularity among the funds we track, with 37 investors holding long positions, versus 26 funds a quarter earlier. Steve Cohen‘s Point72 Asset Management is the largest shareholder with 13.29 million shares, valued at $87.95 million at the end of September.
After yesterday’s fall, shares of Southwestern Energy Company (NYSE:SWN) are gaining ground amid an increase in oil and natural gas prices on the back of cold weather predictions. The Brent and WTI are up by some 2.70% and 3.70%, respectively today, while natural gas futures are trading 5% higher.
Southwestern Energy Company (NYSE:SWN) also gained popularity in the third quarter, with 38 funds reporting shares as of the end of September, amassing 11.7% of the float. Israel Englander‘s Millennium Management has the most valuable position in Southwestern Energy, worth $118.7 million.