Why Are These Stocks Trending Today?

With the VIX above 20 and many investors on edge over the jump in volatility in recent days, Eli Lilly and Co (NYSE:LLY), Willis Towers Watson (NASDAQ:WLTW), Amazon.com, Inc. (NASDAQ:AMZN), Yahoo! Inc. (NASDAQ:YHOO), and Smith & Wesson Holding Corp (NASDAQ:SWHC) are each trending for various reasons. In this article, we will examine why each stock is on the move today.

Moreover, we will also examine relevant hedge fund sentiment toward the equities. In the eyes of most traders, hedge funds are assumed to be underperforming, old investment tools of the past. While there are more than 8000 funds in operation at present, Hedge fund experts at Insider Monkey look at the aristocrats of this group, around 730 funds. Contrary to popular belief Insider Monkey’s research revealed that hedge funds underperformed in recent years because of their short positions as well as the huge fees that they charge. Hedge funds managed to outperform the market on the long side of their portfolio. In fact, the 15 most popular small-cap stocks among hedge funds returned 102% since the end of August 2012 and beat the S&P 500 Index by 53 percentage points (see the details here).

Eli Lilly and Co (NYSE:LLY) shares are 2.34% higher this morning after the drug company updated its 2015 EPS guidance to between $2.28 and $2.33 from the previous range of $2.40 – $2.45 due to tax charges related to a rights acquisition. The company also issued bullish 2016 outlook for EPS of $2.92 – $3.02 and revenues between $20.2 billion and $20.7 billion. A total of 47 funds from our database owned Eli Lilly and Co (NYSE:LLY) as of September 30. That’s up four funds from the previous quarter.

January 5 is the first official day in the life of Willis Towers Watson (NASDAQ:WLTW), as Towers Watson and Willis Group Holdings have successfully completed their merger. Because of the merger, Willis Towers Watson (NASDAQ:WLTW) will offer its clients a range of advice, analytics, specialty capabilities as well as risk and capital management solutions across all segments and geographies. The merger is also expected to deliver annual synergies of $100-$125 million.

In other news, Amazon.com, Inc. (NASDAQ:AMZN) shares are off by 0.8% despite the company releasing positive e-commerce data over its operations. According to a press release, 23 million items were ordered from Amazon sellers on Cyber Monday, a 40% jump from last year’s 16.4 million orders. If the trend carries forward to the new year, Amazon’s revenue could beat expectations for 2016 too.

Amazon.com, Inc. (NASDAQ:AMZN) was a superb performer in 2015 and might need some time to consolidate its gains given the increased market volatility of late. Because Amazon doesn’t make as much in the way of profits as other tech giants do, its stock is more vulnerable to a market sell-off. However, the hedge fund sentiment towards the e-commerce giant has been bullish. Of the around 730 elite funds we track, 113 funds owned $14.98 billion worth of Amazon.com shares at the end of the third quarter, up from 103 funds and $10.46 billion respectively a quarter earlier.

On the next page, we examine Yahoo!, and Smith & Wesson Holding Corp.
Yahoo! Inc. (NASDAQ:YHOO) is trending after the company terminated Screen, one of Yahoo’s online video efforts. Yahoo! Inc. (NASDAQ:YHOO) has come under attack lately by activists and frustrated shareholders who don’t think management is doing enough to cut costs and grow the company’s ex-Alibaba bottom line. Letting go of Screen is a first step that will make Yahoo more efficient. A total of 89 funds from our database were long more than 20% of Yahoo’s float on September 30.

Smith & Wesson Holding Corp (NASDAQ:SWHC) rallied by another 11% today after the company raised third quarter revenue and EPS guidance above consensus and issued bullish fiscal year 2016 EPS guidance range of $1.36 – 1.41, exceeding analyst estimates of $1.32. According to a press release:

“The company indicated that the sell-through rate of its products at distribution has been stronger than originally anticipated, resulting in reduced distributor inventories of its firearms. The company added that Adjusted National Instant Criminal Background Check System (NICS) data for the month of December, which serves as an indicator of consumer purchases, reflected strong growth versus December 2014.”

Because of the tragic shooting in San Bernardino, demand for guns has spiked, as a big gun manufacturer, Smith & Wesson Holding Corp (NASDAQ:SWHC) benefits. Joel Greenblatt’s Gotham Asset Management reported holding 1.1 million shares in its last 13F filing.

Disclosure: none