The stock market has opened higher today and, after a short pullback, has continued on its upward journey, but it hasn’t been all smiles for every stock trading hands today. Shares of LDR Holding Corp (NASDAQ:LDRH), Super Micro Computer, Inc. (NASDAQ:SMCI), and RetailMeNot Inc (NASDAQ:SALE) are all getting battered in morning trading to close the week. We’ll look at why these stocks are tanking today and study the smart money sentiment on each to determine whether they may make for good bounce-back candidates.
We track hedge funds and prominent investors because our research has shown that historically their stock picks delivered superior risk-adjusted returns. This is especially true in the small-cap space. The 50 most popular large-cap stocks among hedge funds had a monthly alpha of about six basis points per month between 1999 and 2012; however the 15 most popular small-cap stocks delivered a monthly alpha of 80 basis points during the same period. This means investors would have generated ten percentage points of alpha per year simply by imitating hedge funds’ top 15 small-cap ideas. We have been tracking the performance of these stocks since the end of August 2012 in real time and these stocks beat the market by 53 percentage points (102% return vs. S&P 500’s 48.7% gain) over the last 37 months (see the details here).
Yesterday after the close, LDR Holding Corp (NASDAQ:LDRH) announced preliminary financial results, estimating revenues of $39.3 million for the 2015 third quarter, below analysts’ consensus of $40.21 million. Full year revenues are expected to range between $168.1 million and $169.5 million. There is more bad news for shareholders, as RBC Capital has reduced its price target for the stock to $33 from the previous target of $50 per share, though it has kept the ‘Outperform’ rating on the stock in place. All in all, the stock has plummeted by more than 20% in the first hour of trading today.
When it comes to LDR Holding Corp (NASDAQ:LDRH), hedge funds seem to prefer caution, with their combined holdings accounting for only 9% of the company’s common stock. During the second quarter of 2015, the number of funds invested in the medical device company increased to 14 from 11, while the value of their investments dropped by 9% to just under $103 million. Although Donald Chiboucis dumped a quarter of his stake in LDR Holding from April 1 through the end of June, his fund Columbus Circle Investors is still the largest shareholder in our database, with 922,552 shares reported in the fund’s latest quarterly filing. James Dondero also exercised caution, trimming his holding by 4% to 650,376 shares.