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.
Super Micro Computer, Inc. (NASDAQ:SMCI) today reduced revenue estimates to roughly $530 million from the previous range of $520 million-to-$580 million. The company’s bottom line has been affected by seasonal effects, as well as a slump in activity in Europe and China. Management is also expecting an increase of $2 million-to-$3 million in operating expenses due to higher costs associated with compensation and marketing expenses. As a result, earnings have been revised down to approximately $0.45 per share.
James Dondero is very optimistic about the prospects of Super Micro Computer, Inc. (NASDAQ:SMCI), having initiated a position that amassed 489,420 shares during the second quarter. This move propelled him to the top of the list of investors we track with positions in the company. Billionaire Ken Griffin also has high hopes for this stock, having increased his investment by 16% to 231,959 shares, according to Citadel Investment Group’s latest 13F filing. Super Micro Computer’s popularity among the funds we follow was dealt a serious blow during the second quarter, as the number of funds holding a position dropped to 14, from 23 at the end of March. The value of their investments also plummeted by 37% to $50.8 million, which now represents a minor 3.6% of the company’s common stock.
The operator of the largest digital offers platform, RetailMeNot Inc (NASDAQ:SALE) is adamant shopping patterns are changing. According to a survey ordered by the company, only a small fraction of consumers believe holiday promotions are worth the wait, while 85% would rather special offers begin earlier. The company has thus concluded that consumers tend to start shopping for the holiday season as early as Labor Day. Investors are not very impressed by their latest Shoppers Trend Report, with shares dropping into the red zone during the first hour of trading. RetailMeNot’s management was quick to appease investors, stating that their special deals still offer customers sizable saving opportunities, according to their own statistical data.
The popularity of RetailMeNot Inc (NASDAQ:SALE) among the hedge funds that we track registered a slight boost during the second quarter, with the number of funds invested in the stock having increased to 21 from 17. The overall value of their positions did however decrease by 3.7% to $197 million, which represents roughly 20% of the company’s outstanding stock. Hedge fund guru Jim Simons is a big fan of RetailMeNot, having boosted his stake by 138% during the quarter to amass 881,208 shares. Scopia Capital, run by Matt Sirovich and Jeremy Mindich, is the biggest shareholder of the stock from the funds we follow, having reported ownership of 6.69 million shares in its latest 13F filing.