The S&P 500 and Dow indexes are up slightly on Wednesday, while the NASDAQ is down by about 0.3%. However, some of the largest decliners of the day are trading on the NYSE. In this article we’ll take a look at NYSE-traded Lannett Company, Inc. (NYSE:LCI), Total System Services, Inc. (NYSE:TSS), Bill Barrett Corporation (NYSE:BBG), VMware, Inc. (NYSE:VMW), and Textron Inc. (NYSE:TXT), and see what’s driving their tumbles as well as what the hedge funds in our database think about these companies.
An everyday investor doesn’t have the same resources and capabilities to analyze different publicly traded companies as hedge funds do. This is why it is a good idea to see what stocks hedge funds like the most and try to imitate some of their bullish moves in an attempt to reap market-beating returns. At Insider Monkey, we follow the activity of several hundred of the best-performing hedge funds as part of our strategy. We analyze their 13F filings and use the data to see what stocks they are collectively bullish on. Through extensive research we have determined that the best approach to outperform the broader indices is to follow hedge funds into their top small-cap ideas. In our backtests, a portfolio of the 15 most popular small-cap stocks generated monthly alpha of 81 basis points, versus 0.7 percentage points posted by hedge funds’ top large- and mega-cap picks (see more details here).
Back to the stocks that interest us today, we’ll start with Lannett Company, Inc. (NYSE:LCI). Shares of the small-cap generic pharmaceuticals company are down about 16% in Wednesday trading, following the pre-announcement of the company’s second quarter of fiscal year 2016 financial results. Management said it is expecting net sales of approximately $127 million, GAAP earnings per diluted share in the $0.33 to $0.36 range and adjusted earnings per diluted share of $0.93-to-$0.95. These results compare to net sales of $114.8 million, GAAP earnings of $1.21 per diluted share, and adjusted EPS of $1.24 posted for the second quarter of fiscal year 2015.
Negative news aside, it seems like hedge funds are confident in Lannett Company, Inc. (NYSE:LCI)’s long-term potential, as the number of hedge funds in our database long the stock rose by 41% in the third quarter. As of September 30, 24 funds disclosed long positions in the company, their stakes comprising 8.7% of the company’s outstanding stock.
Total System Services, Inc. (NYSE:TSS) is another big decliner on Wednesday, down by almost 11%. The fall was propelled by a few news items. On the one hand, the mid-cap payment solutions provider reported its fourth quarter financial results, which included earnings of $0.57 per share, which came in $0.03 below consensus estimates, and revenue of $716.8 million, above the Street’s estimate of $688.94 million. In addition, management announced that the company had reached an agreement to acquire Vista Equity Partners’ TransFirst for roughly $2.35 billion.
On the other hand, Standard & Poor’s Ratings Services lowered its corporate credit and debt rating for Total System Services, Inc. (NYSE:TSS) on late Tuesday. The firm trimmed its grade from “BBB+” to “BBB-.” But, while the agency is bearish on the company’s financial situation, hedge funds have been growing increasingly bullish. Over the third quarter, the number of hedge funds in our system with long stakes in Total System Services rose by more than 38%, to 25.
On the next page, we will look into the events behind the declines at Bill Barrett Corporation (NYSE:BBG), VMware, Inc. (NYSE:VMW), and Textron Inc. (NYSE:TXT).