Why Are These Stocks Trending Today?

It’s Wednesday and the S&P 500 futures are still firmly in the green in pre-market trading despite the fact that the Federal Reserve is set to raise rates in its FOMC meeting for the first time in over 7 years. Among the stocks with abnormally high volume are Array Biopharma Inc (NASDAQ:ARRY), Valeant Pharmaceuticals Intl Inc (NYSE:VRX), Joy Global Inc. (NYSE:JOY), Heartland Payment Systems, Inc. (NYSE:HPY), and Global Payments Inc (NYSE:GPN). Let’s take a closer look.

Given that Insider Monkey has done a lot of research into what the smart money likes and doesn’t like, let’s also analyze relevant hedge fund sentiment toward the stocks. We pay attention to hedge funds’ moves because our research has shown that hedge funds are extremely talented at picking stocks on the long side of their portfolios. It is true that hedge fund investors have been underperforming the market in recent years. However, this was mainly because hedge funds’ short stock picks lost a ton of money during the bull market that started in March 2009. Hedge fund investors also paid an arm and a leg for the services that they received. We have been tracking the performance of hedge funds’ 15 most popular small-cap stock picks in real time since the end of August 2012. These stocks have returned 102% since then and outperformed the S&P 500 Index by around 53 percentage points (see the details here). That’s why we believe it is important to pay attention to hedge fund sentiment; we also don’t like paying huge fees.

Array Biopharma Inc (NASDAQ:ARRY) shareholders received some good news today, as the value of their shares jumped by 26% after the bell as the company announced that its lead product candidate, binimetinib, successfully met its primary efficacy endpoint for improving progression-free survival for patients with a certain type of malignant skin cancer (advanced NRAS-mutant melanoma). According to the results of the Phase 3 clinical trial, patients taking binimetinib experienced a median progression free survival duration of 2.8 months versus the 1.5 months that patients taking the current standard of care, dacarbazine, experienced. The results also showed that Binimetinib was well tolerated. Because of the results, Array Biopharma Inc (NASDAQ:ARRY) plans to file marketing applications for the drug in the first half of 2016. Among the winners in today’s surge is Jim Simons’ Renaissance Technologies, which owned 929,428 shares at the end of September.

Shares of the beleaguered pharmaceutical giant Valeant Pharmaceuticals Intl Inc (NYSE:VRX) are up another 3% after the company released updated guidance figures ahead of its Investor Day presentation. For 2015, the company expects total revenue in the range of $10.4 billion to $10.5 billion and Non-GAAP EPS between $10.23 and $10.33, down from the previous guidance of $11-$11.2 billion and Non-GAAP EPS of $11.67-$11.87. Valeant’s 2016 is expected to be better, however, as the company expects revenue between $12.5 billion and $12.7 billion and Non-GAAP EPS of $13.25 to $13.75. After selling off hard because of drug pricing regulation concerns and the company’s questionable relationship with a specialty pharmacy, Valeant Pharmaceuticals Intl Inc (NYSE:VRX) shares have begun to trend higher. The company still counts many elite funds among its top shareholders, including Bill Ackman’s Pershing Square, which owns 9.9% of the company.

On the next page, we examine Joy Global Inc, Heartland Payment Systems Inc, and Global Payments Inc.

Shares of commodity capital equipment maker Joy Global Inc. (NYSE:JOY) are trending today after the company reported its latest earnings results. For its fourth fiscal quarter, Joy Global reported an EPS of $0.43 on revenue of $865.57 million, exceeding analyst earnings estimates by $0.01 per share and revenue expectations by $74.43 million. Because of the challenging commodity climate, quarterly bookings declined by 21% year-over-year to $617 million and the company cut its quarterly dividend to $0.01 per share from the previous $0.20 per share. For the full year, Joy Global Inc. (NYSE:JOY) earned $1.95 per share on net sales of $3.172 billion. Management expects 2016 adjusted earnings per share to be $0.10-$0.50 on revenue of $2.4-$2.6 billion.

The M&A rumors turned out to be true, as Heartland Payment Systems, Inc. (NYSE:HPY) and Global Payments Inc (NYSE:GPN) are indeed merging. Bloomberg previously published an article stating that Global Payments Inc (NYSE:GPN) was in talks to purchase Heartland Payment Systems, Inc. (NYSE:HPY) as card processors merge to capture more growth from online and mobile shopping. Under terms of the merger, Heartland shareholders will recieve $53.28 in cash and 0.6687 shares of Global Payments for each share of Heartland they own. Global Payments management believes the deal will yield $50 million in annual synergies in fiscal year 2017 and $125 million in annual synergies afterwards and be accretive to EPS. Heartland shares are up 11% while Global Payments shares are down 7% in morning trading.

 

Disclosure: none