The markets remained flat on Monday, and their performance will be directly affected by the reports of the financial results of major US banks. In this way Dow Jones and S&P 500 have inched up by 0.25% and 0.05%, respectively, while the NASDAQ has gained 0.17% so far. Gold has been gaining ground on fears of a delay of the interest rate hike in the US and a weaker dollar. However, amid a flat market, three stocks have opened in the red and are most likely to extend their losses throughout the week. In this article we are going not only to take a closer look at the news that sent these stocks lower, but also at the hedge fund sentiment towards them in order to see whether these companies might have a long-term potential and whether you should buy them on the dip.
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 6 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 10 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 49% gain) over the last 37 months (see more details here).
With this in mind, let’s take a closer look at the three losers on Monday, starting with SunCoke Energy Inc (NYSE:SXC), whose stock has tanked by over 25% on a volume slightly above average. The company reported its financial results for the third quarter earlier today, which indicated a revenue of $336.9 million, down by an annual 40% and a net loss of $23.5 million, significantly wider compared to a loss of $3.6 million posted a year earlier. The producer of coke has also missed the EPS estimate of $0.02 by delivering a loss of $0.36 per share for the quarter. The net loss includes an impairment charge of $19 million, or $0.30 per share related to its VISA SunCoke joint venture, the company said in a statement. Analysts have not commented on the earnings so far, but last month, FBR & Co. initiated coverage on SunCoke Energy Inc (NYSE:SXC)’s stock with ‘Outperform’ rating and $18.00 price target. According to our data, 35 funds out of over 700 that we track are betting big on SunCoke as they amassed nearly 40% of SunCoke Energy Inc (NYSE:SXC), according to the last round of 13F filings, even though the number of funds declined by two during the second quarter and the aggregate value of their holdings fell to $332.96 million from $401.36 million. Among the top three shareholders of SunCoke is billionaire Israel Englander‘s Millennium Management, which upped its stake by 29% on the quarter to 2.95 million shares. Jim Simons’ Renaissance Technologies also raised its stake by 38% over the quarter to 1.19 million shares, according to its latest 13F.
Let’s take a look at two other stocks that have been losing ground on Monday.