In the first trading day after the Federal Reserve raised short term interest rates, many normally bullish investors are a bit skittish as the Dow Jones is off more than 160 points and the S&P is off over 1 percentage point. Not only is the third year of the election cycle coming to an end, but many dangerous geopolitical conflicts could arise in the Middle East as crude continues to take a leg lower. Bucking the trend and going the opposite way are MYOS Corp (NASDAQ:MYOS), Rewalk Robotics Ltd (NASDAQ:RWLK), Second Sight Medical Products Inc (NASDAQ:EYES), and Sientra Inc (NASDAQ:SIEN), each of which are rallying because of different catalysts. Let’s take a closer look.
Moreover, we will also examine relevant hedge fund sentiment toward the equities. 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).
Investors of MYOS Corp (NASDAQ:MYOS), an emerging bionutrition and biotherapeutics company, certainty have something to be happy about after it entered into a securities purchase agreement with Chinese company RENS Technology in which RENS will invest up to $30.375 million in MYOS. Under the terms of the agreement, MYOS will receive $20.3 million in exchange for issuing equity at $5.74 per share over a period of 24 months. The company could potentially receive $10.1 million more in additional cash from the exercise of warrants exercisable at a weighted-average exercise price of $11.45 per share (although at MYOS’ current price this seems unlikely to occur). The agreement will help distribute MYOS’ products in Southeast Asia and China. MYOS Corp (NASDAQ:MYOS) Chairman Dr. Robert Hariri said:
“We are delighted that RENS Agriculture and its affiliates have agreed to make such a meaningful strategic investment in MYOS. This investment will not only bring significant capital to enable growth and expansion of our marketing efforts and research and development, but will also enable us to build a global presence for our products.”
Although MYOS shares are up over 70% on the news, given the small nano-cap status and relative illiquidity of MYOS, we would stay on the sidelines until there are more positive fundamental data-points.
MYOS isn’t the only healthcare company that has received some good news today, as Rewalk Robotics Ltd (NASDAQ:RWLK) shares have doubled on the news that the U.S. Department of Veterans Affairs will pay for Rewalk’s exoskeleton systems for U.S. veterans that qualify. Rewalk Robotics Ltd (NASDAQ:RWLK) makes the only FDA-approved exoskeleton system available in the United States and the deal will increase demand for the company (perhaps substantially depending on the qualifying conditions). A total of two funds from our database owned around 0.7% of Rewalk Robotics’ float at the end of September.
On the next page, we examine Second Sight Medical Products and Sientra.