The markets opened higher this morning amid hopes that a meeting of major oil producers scheduled for Sunday would result in a production freeze. Interfax, a Russian news agency, reported today that Russia and Saudi Arabia have already reached a consensus to stop production ahead of the meeting, pushing Brent to 2016 highs. However, Monday’s dismal launch of earnings season has readied investors for what could be the worst earnings season since the financial crisis. Among the stocks losing ground this morning are Spirit Realty Capital, Inc (New) (NYSE:SRC), Horizon Pharma PLC (NASDAQ:HZNP), Och-Ziff Capital Management Group LLC (NYSE:OZM), Bank Of The Ozarks Inc (NASDAQ:OZRK), and Micron Technology, Inc. (NASDAQ:MU). Let’s see why investors aren’t overly excited about these stocks today and how some of the best investors in the world have been trading them of late.
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).
Spirit Realty’s Public Offering Gets Upsized
Spirit Realty Capital, Inc (New) (NYSE:SRC)’s stock has lost approximately 3% after the company upsized the pricing of its underwritten public offering to 30 million shares at a price of $11.15 per share on Monday, from 27 million shares. The company estimates that the overall proceeds from the offering after the deduction of expenses will amount to $320.7 million. The company plans to use the net proceeds in order to reduce the outstanding amount under its $370 million term loan facility. Shares of the company have gained over 12% in 2016 and were approaching their 52-week high, making it a prime time to make an offering.
Out of the 785 hedge funds tracked by Insider Monkey, 24 held positions in Spirit Realty Capital, Inc (New) (NYSE:SRC) at the end of 2015 with a total value of approximately $363.9 million. Greg Poole’s Echo Street Capital Management was one of the most notable of those hedge funds, with ownership of more than 7.00 million shares of the company.
Horizon Pharma Guidance Disappoints
Horizon Pharma PLC (NASDAQ:HZNP) has plummeted by more than 20% following its announcement this morning that relayed disappointing quarterly guidance for the full 2016 fiscal year. According to the presentation, the company estimates net sales of $1.025 billion-to-$1.050 billion and adjusted EBITDA of $505 million-to- $520 million for the full fiscal year. The net sales guidance for the first quarter comes in at approximately $195 million-to-$210 million, which would represent a 79% year-over-year growth at the midpoint, but which is nonetheless well below consensus estimates of $228 million.
A total of 31 hedge funds out of those in our database held positions in Horizon Pharma PLC (NASDAQ:HZNP) at the end of the fourth quarter, with a total value of approximately $1.1 billion. Stephen Mandel’s Lone Pine Capital owned 15.00 million shares of the company on December 31.
On the next page we’ll look into three more stocks that are having a rough go of it with traders today.