After Friday’s sharp drop in equity prices, more investors are keeping tabs on the market to see whether the recent interest rate fears will cause the indexes to enter into correction territory. Although the market is nowhere close to correction levels currently, stocks have historically fallen faster than they rise. Whether stocks will be a good buy in the short-to-medium terms is an open question.
Among the stocks that are capturing traders’ interest today are Mylan NV (NASDAQ:MYL), Teva Pharmaceutical Industries Ltd (ADR) (NYSE:TEVA), Ford Motor Company (NYSE:F), Apple Inc. (NASDAQ:AAPL), and Southwest Airlines Co (NYSE:LUV). In this article, we’ll examine the events that are garnering attention for each stock while also using the latest 13F filings data to see how successful hedge funds are positioned in them.
We believe that imitating hedge funds and other large institutional investors can be helpful in identifying stocks capable of outperforming the broader market. Through extensive research that covered portfolios of several hundred large investors between 1999 and 2012, we determined that following the small-cap stocks that large money managers are collectively bullish on, can generate monthly returns nearly 1.0 percentage points above the market (see the details here).
Mylan NV (NASDAQ:MYL)‘s EpiPen might get competition sooner than expected. Although Teva Pharmaceutical Industries Ltd (ADR) (NYSE:TEVA)‘s generic application for an EpiPen-like product was rejected by the FDA in February due to “major deficiencies”, it seems the recent political controversy over Mylan’s past price increases in the essential drug has prompted the FDA to change its mind. According to Teva, due to the “media attention in the last two weeks, the FDA has come back to us and we will have a meeting very, very quickly.” Given the FDA’s sudden shift, Teva says that it now hopes to win the agency’s approval for a generic version of the treatment by late-2017 or early-2018. If that happens, Mylan’s EpiPen market-share, which currently stands at around 94%, could fall dramatically. That’s important news for Mylan, as EpiPen accounted for about one-fifth of the drug company’s profits before it was forced to cut pricing by 50% in many cases.
Of the 749 hedge funds that we track which filed 13Fs for the June quarter, 44 owned shares of Mylan NV (NASDAQ:MYL) on June 30 and 55 had a long position in Teva Pharmaceutical Industries Ltd (ADR) (NYSE:TEVA).
Southwest Airlines Co (NYSE:LUV) is in the news after the company reached a deal in principle with the Transport Workers Union, which represents around 12,000 flight attendants. Although the terms of the tentative deal were not released, more certainty is always good. A labor strike would have severely hurt Southwest’s business and near-term profits. Southwest previously struck a tentative deal with its pilots union in August. David Tepper‘s Appaloosa Management established a new stake of almost 3.5 million shares in Southwest Airlines Co (NYSE:LUV) in the second quarter.
On the next page, we’ll examine the headline-making events concerning Ford and Apple over the weekend.