Major U.S. stock indexes are slightly in the red, dragged by the weak performance of several stocks. Among the top losers on Thursday are Silver Wheaton Corp. (USA) (NYSE:SLW), Target Corporation (NYSE:TGT), Movado Group, Inc (NYSE:MOV), Anacor Pharmaceuticals Inc (NASDAQ:ANAC) and PBF Logistics LP (NYSE:PBFX). In this article, we are going to take a closer look into the events that are dragging these stocks lower and see if the hedge fund sentiment towards them can suggest any buying opportunity.
Our research determined that following the small-cap stocks, that hedge funds are collectively bullish on, can help a smaller investor beat the S&P 500 by around 95 basis points per month (see more details here).
Let’s start with Silver Wheaton Corp. (USA) (NYSE:SLW), whose stock is down by more than 4.8% on Thursday afternoon. On Wednesday, the company announced plans to sell new shares worth $500 million, which sent the stock tumbling. Then, on Thursday morning, the Canadian miner said that, “due to strong demand,” it had decided to increase the size of the offering to 33.135 million common shares – up from the previous 30.125 million. The offering was priced at $16.60 per common share; aggregate gross proceeds should reach approximately $550 million. Proceeds will be used to repay a part of the debt drawn on the company’s $2 billion revolving credit facility in November 2015, used to purchase the silver stream on the Antamina mine in Peru – which cost $900 million.
Although 19 funds among those we track were long Silver Wheaton Corp. (USA) (NYSE:SLW) at the end of the fourth quarter, they owned only 3.7% of the company’s outstanding stock. Among them, the largest stake was held by Murray Stahl’s Horizon Asset Management, which last disclosed ownership of 3.98 million shares.
Next up is Target Corporation (NYSE:TGT), whose shares have declined by 1.2% after Barclays downgraded the stock to ‘Underweight’ from Overweight, and trimmed its price target to $70 from $90. The analysts cited sluggish digital sales growth and increasing pressures from Amazon.com, Inc. (NASDAQ:AMZN). In addition, the report noted, the company’s cuts in CAPEX and ad spend do not align with company’s recently raised long-term 3% comparable sales growth goal. “We believe the underlying competitive dynamics of the general merchandise category, including heightened exposure to the threat of Amazon, would make it exceptionally challenging to even reach a 3% comp, much less consistently do so,” Barclays said.
Among the funds that we track, 17 held long positions in Target Corporation (NYSE:TGT) at the end of the fourth quarter of 2015. These firms held more than 20% of the company’s total shares heading into 2016. The largest shareholder in our database was Cliff Asness’ AQR Capital Management, which last declared holding 3.06 million shares, worth more than $222 million by the end of the quarter.
Shares of Movado Group, Inc (NYSE:MOV) have lost more than 7.1% on Thursday, following the announcement of the company’s fourth-quarter financial results. While earnings of $0.40 per share came in $0.01 ahead of expectations and revenue of $143.3 million also beat estimates by $2.6 million, guidance for the ongoing year disappointed investors. For fiscal 2017, management said it expects EPS between $1.85 and $2 on revenue in the range of $585 million to $600 million, well below the Street’s consensus of $2.27 and $615 million. Finally, the company also announced that its Chief Operating Officer Rick Coté will be retiring in June, and boosted its quarterly dividend to $0.13 per share from $0.11.
A total of 14 funds among those we track were long Movado Group, Inc (NYSE:MOV) at the end of 2015 and their combined holdings accounted for more than 10% of the company’s outstanding stock. The largest position was reported by Chuck Royce’s Royce & Associates, which last disclosed ownership of 1.19 million shares of the company.
Also tumbling on Thursday is Anacor Pharmaceuticals Inc (NASDAQ:ANAC), whose shares are 7% in the red. On Wednesday, the company announced a private offering of $250 million aggregate principal amount of Convertible Senior Notes due 2023. Initial purchasers will be granted a 30-day option to buy up to an additional $37.5 million of the Convertible Notes.
Hedge fund support for Anacor Pharmaceuticals Inc (NASDAQ:ANAC) has been declining recently. Over the fourth quarter, the number of funds long the stock, among those we track, fell by 33% to 24. Thomas Steyer’s Farallon Capital Management sold all of its 340,000 shares of the company during the October-December period.
PBF Logistics LP (NYSE:PBFX)’s stock has slid by 8%, after the company priced its public offering of 2.5 million common units representing limited partner interests for total gross proceeds of $46 million. The partnership will use the net proceeds from the offering “to fund a portion of the purchase price for the previously announced acquisition of four refined product terminals located in the greater Philadelphia region from an affiliate of Plains All American Pipeline, L.P. for total cash consideration of $100.0 million, and, pending such use, to reduce indebtedness outstanding under its revolving credit facility and for general partnership purposes,” the company said in a press release.
Only two funds among those we track were long PBF Logistics LP (NYSE:PBFX) at the end of 2015. One of them was Matthew Hulsizer’s Peak6 Capital Management, which last declared holding 92,290 shares of the company, worth slightly less than $2 million.
Disclosure: Javier Hasse holds no positions in any of the securities mentioned above.