After catching a small break on Thursday, the markets returned to their 2016 plummeting ways on Friday, with major U.S stock indexes down by 3% or more. Among the stocks driving these declines, we can count NVIDIA Corporation (NASDAQ:NVDA), Cisco Systems, Inc. (NASDAQ:CSCO), Bank of America Corp (NYSE:BAC), and Targa Resources Corp (NYSE:TRGP). But, what’s behind these tumbles? And, beyond today’s drops, what do hedge funds think about these companies? Read on to find out.
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Back to the stocks that interest us, we’ve got NVIDIA Corporation (NASDAQ:NVDA) up first, down by more than 6.5% in Friday trading. The drop followed Barclays’ downgrade of the stock from ‘Equal Weight’ to ‘Underweight’. Barclays analyst Blayne Curtis also cut his price target on the stock by $2 to $23, arguing that fundamentals don’t support the current valuation; over 2015 the stock gained more than 60%.
Hedge funds seem to like NVIDIA Corporation (NASDAQ:NVDA) though. Over the latest reported quarter the number of hedge funds in our database that held long stakes in the company rose by 13% to 34. Moreover, the largest hedge fund shareholder of record, David Harding’s Winton Capital Management, boosted its stake in the tech company by 24% over the third quarter, taking its stake to 3.36 million shares, worth more than $82 million.
Next up is another large-cap tech company, Cisco Systems, Inc. (NASDAQ:CSCO), which is down by almost 4% on Friday afternoon. It is not clear what’s behind the decline, but it could be the fact that, on late Thursday, investment firm Dalton Greiner Hartman Maher & Co said it had trimmed its exposure to the company by 6.8% during the fourth quarter of 2015. However, it could also be because the Electronic Frontier Foundation is pursuing the company in court, accusing it of building a system for the Chinese government to use for the purpose of human rights violations.
Opposite to NVIDIA Corporation (NASDAQ:NVDA), hedge funds have been losing faith in Cisco Systems, Inc. (NASDAQ:CSCO), as the number of hedge fund backers of the stock among those in our system fell to 67 by September 30, down by five over the third quarter of 2015. Notably, their involvement in the company is quite small: these 67 firms own only 3.2% of the company’s total outstanding shares. Moreover, Donald Yacktman’s Yacktman Asset Management, the largest hedge fund investor in our files, disclosed a 15% reduction in its holding of the company. As of September 30, the firm held 36.11 million shares of Cisco, worth almost $950 million.
On the next page we will look into the events pushing Bank of America Corp (NYSE:BAC) and Targa Resources Corp (NYSE:TRGP) downwards.
Bank of America Corp (NYSE:BAC) is down by more than 4% this afternoon after Citigroup Inc (NYSE:C) reported its fourth-quarter financial results. The fourth-largest bank in the U.S (which just fell from third place) delivered a beat on both the top and bottom lines, but analysts questioned the results, as a large number of one-time items prevented investors from getting a clear picture of what’s going on; some even said that “if you strip out gains on the sale of unwanted assets, Citi missed expectations by some distance” (CNBC).
Much like NVIDIA Corporation (NASDAQ:NVDA), hedge funds have become increasingly bullish on Bank of America Corp (NYSE:BAC), with the number of firms betting on it having surged by over 13% during the third quarter of 2015, to 108. That made it the tenth-most popular stock among the hedge funds in Insider Monkey’s database. However, readers should note that these 108 firms own only 4% of the company’s total outstanding stock; Ken Fisher’s Fisher Asset Management holds the largest stake of those 108 investors, comprising 42.69 million shares, or 0.4% of the total shares.
Finally, there’s Targa Resources Corp (NYSE:TRGP), the largest decliner in this list. The small-cap utilities company was down by more than 13% in Friday trading, although no particular news aside from the hemorrhaging oil prices. The drop is a continuation of the long decline the stock has been experiencing thanks to said oil prices. Over the past six months, shares have fallen by almost 82%, with almost half of this loss being registered over the past month, when the stock lost over 42%.
Despite the falling stock, hedge funds stayed put in Targa Resources Corp (NYSE:TRGP). As of the end of the third quarter, 22 funds in our database were long the small-cap natural gas company, same as at the end of the previous quarter. Leon Cooperman’s Omega Advisors held the largest stake, comprising 1.95 million shares, worth approximately $100 million.
Disclosure: Javier Hasse holds no positions in any of the securities mentioned in this article.