Why Red Hat, Shutterfly, Amazon, TerraForm and More Are in the Spotlight

With one major catalyst over (the Fed kept interest rates the same), traders are now keenly focused on this month’s other major catalyst, the Russia/OPEC meeting in Algeria. If the oil producers release positive language, crude could potentially rally and power the market even higher.

In this article, we’ll find out why traders are talking about Red Hat Inc (NYSE:RHT), Shutterfly, Inc. (NASDAQ:SFLY), Amazon.com, Inc. (NASDAQ:AMZN), Bed Bath & Beyond Inc. (NASDAQ:BBBY), and TerraForm Power Inc (NASDAQ:TERP), and use the latest 13F data to see how hedge funds were positioned in each one at the end of the second quarter.

At Insider Monkey, we track over 750 hedge funds, whose quarterly 13F filings we analyze and determine their collective sentiment towards several thousand stocks. However, our research has shown that the best strategy is to follow hedge funds into their small-cap picks. This approach can allow monthly returns of nearly 95 basis points above the market, as we determined through extensive backtests covering the period between 1999 and 2012 (see the details here).

Red Hat Inc (NYSE:RHT) shares are noticeably higher after the software company beat both top- and bottom-line estimates with its fiscal second quarter results. For the period, Red Hat earned $0.55 per share on revenue of $599.8 million, beating estimates by $0.01 per share and $6.46 million respectively. Sales rose by 19% year-over-year as subscription revenue jumped by 20% year-over-year and total deferred revenue inched up by 19%. For its full fiscal year, Red Hat expects adjusted EPS of $2.23-to-$2.25 on sales of $2.41 billion-to-$2.435 billion. Anand Parekh‘s Alyeska Investment Group established a new position of 521,762 shares in Red Hat Inc (NYSE:RHT) during the second quarter.

Shutterfly, Inc. (NASDAQ:SFLY) is in the spotlight after its stock fell sharply in late trading on Wednesday, by around 12.4%, due to everything store Amazon.com, Inc. (NASDAQ:AMZN) introducing Amazon Prints, a photo printing destination for Prime photos and Amazon drive customers (photo books start at $19.99). Some investors worried that Amazon would eventually disrupt the photo book market, just as it has many other sectors over the years, and headed for Shutterfly’s exits. Baird analyst Colin Sebastian thinks the sharp move on Wednesday in Shutterfly’s shares was an overreaction however, as Amazon’s new service might be intended to just supplement the value of Amazon Drive and Prime, rather than to take market share from existing players.

According to our database of 749 13F-filing funds, Amazon.com, Inc. (NASDAQ:AMZN) was one of the most popular stocks among the smart money set, with 145 funds reporting a long position in it as of the end of the second quarter. Comparatively, Shutterfly, Inc. (NASDAQ:SFLY) was less popular, with just 22 funds holding shares at the same time.

On the next page, we’ll find out why traders are talking about Bed Bath & Beyond and TerraForm Power.

Bed Bath & Beyond Inc. (NASDAQ:BBBY) is in the spotlight after the retailer reported fiscal second quarter earnings of $1.11 per share on revenue of $2.99 billion, missing the consensus estimates by $0.06 per share and $60 million respectively. One reason for the miss was that comparable-store sales inched lower by 1.2% year-over-year. For its full fiscal year, Bed Bath & Beyond’s management sees EPS coming in at between $4.50 and $5.00. On the bright side, comparable-sales from customer-facing digital channels did grow in excess of 20%. The hedge funds in our system were slightly more optimistic on Bed Bath & Beyond in the second quarter. According to our records, the number of those funds with holdings in Bed Bath & Beyond Inc. (NASDAQ:BBBY) rose by two during the second quarter to 27 at the end of June.

A few days after TerraForm Power Inc (NASDAQ:TERP) disclosed that it is considering selling itself, Bloomberg is reporting that deep-pocketed institution BlackRock has entered into the collection of potential buyers for the yieldco. According to SEC filings, BlackRock owned around 5.3% of TerraForm Power’s Class A shares on June 30. Other potential bidders include David Tepper‘s Appaloosa Management, Brookfield Asset Management and Golden Concord Holdings. 26 funds that we track had a long position in TerraForm Power Inc (NASDAQ:TERP) as of the most recent 13F reporting period, down by three funds from the previous reporting period.

Disclosure: None