With all three indexes roughly flat in morning trading as many veteran market participants kick back for the holidays and the rookies try to hold the fort, California Resources Corp (NYSE:CRC), Bill Barrett Corporation (NYSE:BBG), Cal-Maine Foods Inc (NASDAQ:CALM), and Adamas Pharmaceuticals Inc (NASDAQ:ADMS) are each trending on the back of various catalysts. Let’s take a closer look at each stock.
In addition, let’s analyze hedge fund sentiment toward the stocks, if relevant. Most investors don’t understand hedge funds and indicators that are based on hedge funds’ activities. They ignore hedge funds because of their recent poor performance in the bull market. Our research indicates that hedge funds underperformed because they aren’t 100% long. Hedge fund fees are also very large compared to the returns generated and they reduce the net returns experienced by investors. We uncovered that hedge funds’ long positions actually outperformed the market. For instance the 15 most popular small-cap stocks among funds beat the S&P 500 Index by 52 percentage points since the end of August 2012. These stocks returned a cumulative of 102% vs. a 48.6% gain for the S&P 500 Index (see the details here). That’s why we believe investors should pay attention to what hedge funds are buying (rather than what their net returns are).
Shares of California Resources Corp (NYSE:CRC) and Bill Barrett Corporation (NYSE:BBG) are off by 4.9% and 10.5%, respectively, as investors take profits on yesterday’s run-up in each stock. The independent E&Ps received good news yesterday after the Energy Information Agency announced that U.S. oil inventories fell by 4.9 million barrels last week (versus the expectation of a 0.6 million barrel build-up) to 484.8 million barrels. The 4.9 million barrel drawdown is despite the abnormally warm seasonal weather that has reduced demand for heating oil. If the weather had been colder, the drawdown would have been even more pronounced. The bulls received additional good news yesterday, with Baker Hughes reporting that the U.S. oil rig count fell to 538, down 3 from the previous week.
California Resources Corp (NYSE:CRC) and Bill Barrett Corporation (NYSE:BBG) are off because although inventories fell more than expected, they are still at the highest level this time of the year in more than 80 years. At the moment, the crude bears are very much alive and have a lot of fundamental supply and demand data to back their case up. Whether the bearish dynamic changes in the short run is anyone’s guess. Of the around 730 elite funds we track, 31 funds owned $293.19 million of California Resources Corp (29.30% of the float) and 16 funds owned 9.60% of Bill Barrett Corporation (NYSE:BBG)’s float at the end of the third quarter.
On the next page, we examine Cal-Maine Foods Inc, and Adamas Pharmaceuticals Inc.
Cal-Maine Foods Inc (NASDAQ:CALM) shares were off more than 6% today before rallying to green territory in morning trading after the shell egg producer reported its latest quarterly results. For its second quarter, the company reported EPS of $2.26 on revenue of $546 million, missing estimates by $0.14 per share and $6.31 million. Cal-Maine Foods Inc (NASDAQ:CALM) results were lower than expected mostly because of weaker egg pricing and higher feed costs. CEO Dolph Baker said:
“Our industry continues to deal with the significant reduction in the national laying hen flock that occurred this past spring related to the Avian Influenza (AI) outbreaks in the upper Midwestern United States. While the supply is gradually starting to move back up, the current national laying hen flock reported by the USDA yesterday is still approximately nine percent lower than it was a year ago. Egg prices have moved lower than expected in spite of the reduced supply, and we expect prices will remain volatile until the industry has more clarity on future supply levels.”
Following the report, the analysts at D.A. Davidson trimmed their price target to $60 from $65 but said they would be buyers on weakness, as they like Cal-Maine’s planned increase in specialty egg production, which should increase prices in the long run.
Adamas Pharmaceuticals Inc (NASDAQ:ADMS) is 2.4% higher in morning trading as momentum from yesterday’s good news pushes the stock forward. On Wednesday, Adamas Pharmaceuticals Inc (NASDAQ:ADMS) announced that its lead product candidate, ADS-5102 (amantadine HCl), had successfully met the primary endpoint in a phase 3 clinical trial concerning its safety and efficacy for the treatment of levodopa-induced dyskinesia in Parkinson’s disease patients. Adamas will present a more comprehensive version of the data gleaned from the trial at an upcoming scientific conference. A total of 15 funds from our database, including Jim Simons’ Renaissance Technologies, owned 12.5% of the company’s float at the end of September.