Wall Street has experienced mixed sentiment on Friday, following the release of disappointing April jobs data out of the U.S, which has created increased uncertainty around the health of the economy and the probability of a rate hike. Among the day’s largest decliners are El Pollo LoCo Holdings Inc (NASDAQ:LOCO), KemPharm Inc (NASDAQ:KMPH), Endo International plc – Ordinary Shares (NASDAQ:ENDP), FireEye Inc (NASDAQ:FEYE), and Scientific Games Corp (NASDAQ:SGMS), which are posting big losses in the afternoon hours. Let’s check out why these stocks are sliding today and see what the funds in our database think about these companies.
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).
El Pollo LoCo Tumbles on Disappointing Results
Shares of El Pollo LoCo Holdings Inc (NASDAQ:LOCO) are trading down by almost 13% on Friday afternoon following the announcement of the company’s first quarter financial results. After the market closed on Thursday, the restaurants operator posted EPS of $0.17 on revenue of $94.35 million, missing the Street’s consensus estimates by $0.01 and $2.44 million, respectively. While comps were slightly up, by 0.7% system-wide, restaurant contribution margin dropped by 160 basis points to 20.7%, driven by increased labor costs.
By the end of 2015, El Pollo LoCo Holdings Inc (NASDAQ:LOCO) was in the portfolios of seven hedge funds in our database. However, one of those shareholders, Andy Redleaf’s Whitebox Advisors, closed its stake during the first quarter, which had comprised 147,202 shares at the end of 2015.
KemPharm Plummets on FDA Non-Recommendation
Next up is KemPharm Inc (NASDAQ:KMPH), a micro-cap clinical-stage specialty pharmaceutical company that is trading down by more than 55.7% this afternoon. The steep decline is due to the FDA advisory committee’s decision to not recommend the addition of abuse-deterrent labeling to the company’s Apadaz painkiller, after it recommended the drug for approval. The FDA’s action date (PDUFA) has been set for June 9, and while the recommendation is not binding, the agency tends to follow the advisory committee’s lead.
Much like El Pollo LoCo, KemPharm Inc (NASDAQ:KMPH) had 7 hedge fund backers in our database at the end of 2015. Their combined stakes accounted for more than 22% of the company’s total shares on December 31.
Three more stocks that are sinking on the Nasdaq today are discussed on the next page.