Why Brocade, Cempra, Apple, and Two Other Stocks Are in Spotlight Today

WTI futures are down 3% today after the EIA reported that oil inventories rose by 14.4 million barrels last week. That number is a marked departure from the trend in previous weeks where inventories were comfortably negative.

In this article, let’s examine why traders are talking about Broadcom Ltd (NASDAQ:AVGO), Brocade Communications Systems, Inc. (NASDAQ:BRCD), T-Mobile US Inc (NASDAQ:TMUS), Apple Inc. (NASDAQ:AAPL), and Cempra Inc (NASDAQ:CEMP). In addition, we are going to assess the hedge fund sentiment towards the companies in question.

At Insider Monkey, we track around 750 hedge funds and institutional investors. Through extensive backtests, we have determined that imitating some of the stocks that these investors are collectively bullish on, can help retail investors generate double digits of alpha per year. The key is to focus on the small-cap picks of these funds, which are usually less followed by the broader market and allow for larger price inefficiencies (see the details here).

It’s official. Broadcom Ltd (NASDAQ:AVGO) has agreed to buy Brocade Communications Systems, Inc. (NASDAQ:BRCD) for $12.75 in cash per share, for a total value of $5.9 billion. The purchaser expects to finance the deal with cash on its balance sheet and new debt. Broadcom management expects the deal to be immediately accretive to adjusted EPS and FCF upon deal close. The deal is expected to close in the second half of Broadcom’s fiscal year 2017. CEO Hock Tan said:

“This strategic acquisition enhances Broadcom’s position as one of the leading providers of enterprise storage connectivity solutions to OEM customers. With deep expertise in mission-critical storage networking, Brocade increases our ability to address the evolving needs of our OEM customers. In addition, we are confident that we will find a great home for Brocade’s valuable IP networking business that will best position that business for its next phase of growth.”

Among the funds in our databas, 28 were long Brocade Communications Systems, Inc. (NASDAQ:BRCD) and 74 had a bullish position on Broadcom Ltd (NASDAQ:AVGO) at the end of the second quarter.

T-Mobile US Inc (NASDAQ:TMUS) is in the spotlight after Morgan Stanley analyst Simon Flannery reaffirmed his ‘Overweight’ rating and raised his price target to $60 per share from $58. The analyst thinks the telecom’s 2016 guidance is conservative and that T-Mobile can sustain its robust subscriber growth in the long term. Andreas Halvorsen‘s Viking Global raised its stake in T-Mobile US Inc (NASDAQ:TMUS) by 421% to just under 14 million shares in the second quarter.

On the next page, we find out why the spotlight is on Apple, and Cempra.

Although Goldman Sachs is unquestionably the top bank of Wall Street right now, the investment bank apparently has its limits, as CNBC recently reported that (according to its sources) Apple Inc. (NASDAQ:AAPL) isn’t interested in bidding for Time Warner at this time. Goldman Sachs was previously rumored to have been pushing Apple to make a rival bid for Time Warner after the media giant agreed to sell itself to AT&T. A total of 116 top funds tracked by Insider Monkey held $10.68 billion worth of Apple Inc. (NASDAQ:AAPL)’s stock, which accounted for 2.00% of the float on June 30, versus 152 funds and $14.82 billion, respectively, on March 31.

Cempra Inc (NASDAQ:CEMP) shares are 46% in the red after the FDA released background information for the advisory committee scheduled to review solithromycin. What might have spooked some investors was a particular section saying:

“Despite the differences in chemical structure, the hepatic adverse effects seen with solithromycin during its development program exceed the pre-marketing hepatic signal seen with telithromycin. Significant gaps in knowledge of the hepatic toxicity profile of solithromycin exist. For example, the likelihood of serious idiosyncratic liver injury in a larger population and the impact of prior sensitization to macrolides on solithromycin-induced liver injury are unknown.”

Some traders speculate the ‘unknown’ phrase might hint at the need for more studies. A total of 14 funds had a bullish position in Cempra Inc (NASDAQ:CEMP) at the end of the second quarter, unchanged from the previous quarter.

Disclosure: none