Why Are These Stocks Surging Today?

At a time when the US stock market is deep in the red, shares of Sunedison Inc (NYSE:SUNE), MagneGas Corporation (NASDAQ:MNGA), Gold Fields Limited (ADR) (NYSE:GFI), and BioPharmX Corp (NYSEMKT:BPMX) are gaining ground. Let’s take a closer look and find out why.

We are also going to examine relevant hedge fund sentiment toward these stocks. But why do we track hedge fund activity? From one point of view we can argue that hedge funds are consistently underperforming when it comes to net returns over the last three years, when compared to the S&P 500. But that doesn’t mean that we should completely neglect their activity. There are various reasons behind the low hedge fund returns. Our research indicated that hedge funds’ long positions actually beat the market. In our back-tests covering the 1999-2012 period hedge funds’ top small-cap stocks edged the S&P 500 index by double digits annually. The 15 most popular small-cap stock picks among hedge funds also bested passive index funds by around 53 percentage points over the 36 month period beginning from September 2012 (see the details here).

First on our list of gainers is renewable energy developer Sunedison Inc (NYSE:SUNE), whose shares are 3.5% higher as investors become more optimistic about the company’s liquidity situation. Sunedison Inc (NYSE:SUNE) shares soared by 14% on Wednesday after the company amended its Vivint Solar Inc (NYSE:VSLR) acquisition with Blackstone. Under the terms of the new deal, SunEdison will pay $2.00 less in cash and $0.75 more in stock and Blackstone will likely become a major holder of the company after the deal closes. Further helping matters is the recent news that Sunedison will sell 333 MW of wind plants in Maine to Terra Nova Renewable Partners, a joint venture formed with investors of JPMorgan Asset Management. The sale will help Sunedison raise another $209 million in liquidity. Given the recent spate of deals, we would not be surprised if Sunedison Inc (NYSE:SUNE) management makes more liquidity-enhancing measures. Shares could use all the help they can get as Sunedison shares are down by almost 80% year-to-date.

Of the around 730 funds we track, 73 funds owned 46.8% of Sunedison’s stock at the end of September. Among the funds long the stock are David Einhorn’s Greenlight Capital, with a holding of 18.61 million shares, and Larry Robbins’ Glenview Capital, with a stake of 9.79 million shares.

Next up is MagneGas Corporation (NASDAQ:MNGA), whose shares are up by another 13% today as the stock continues to rally on technical buying and possibly short covering. MagneGas Corporation (NASDAQ:MNGA) shares broke through technical resistance of $1.60 per share in early December and haven’t looked back. MagneGas Corporation produces hydrogen-based alternative fuels through the gasification of carbon-rich liquids in the United States and internationally. Given the low crude prices, alternative energy is not exactly in high demand right now and we would stay on the sidelines until there are more fundamental data-points.

On the next page, we examine why Gold Fields and BioPharmX are surging.In other news, Gold Fields Limited (ADR) (NYSE:GFI) is trading 4% higher as near-month gold commodity prices try to stage a recovery. Although many market analysts expect the Federal Reserve to raise rates during the FOMC meeting next week, there are still many reasons to own gold, including the fact that Syria is currently a complete mess right now, with the United States, Russia, France, and the United Kingdom all doing bombing raids in various parts of the country. If the chaos spreads to the other parts of the Middle East, gold prices will rally. Hedge fund sentiment has stayed steady in Gold Fields Limited (ADR) (NYSE:GFI), as the number of elite funds long the stock remained unchanged at 16 at the end of the third quarter

Last on our list of gainers is BioPharmX Corp (NYSEMKT:BPMX), whose shares have surged by 80% on the news that the company has closed a direct placement of 4.1 million shares priced at $1.43 per unit. Investment vehicles of Franklin Advisors were the buyers and BioPharmX Corp (NYSEMKT:BPMX) plans to use the money raised to support the company’s marketing, clinical trials for topical acne treatments, and other R&D purposes. Due to the company’s small size, smart money investors have been overlooking the stock so far. The only fund from our database that owns shares of BioPharmX, is Israel Englander’s Millennium Management, which reported a stake containing 34,091 shares in its latest 13F filing.

Disclosure:None