U.S stocks are strong out of the gate this morning ahead of the first quarter earnings season that unofficially kicks off after the market close today. The positive sentiment is in contrast to what analysts are predicting will be a dismal earnings season, with consensus estimates predicting a 7% year-over-year decline. Amid this backdrop, Sony Corp (ADR) (NYSE:SNE), Hertz Global Holdings Inc (NYSE:HTZ), Avis Budget Group Inc. (NASDAQ:CAR), Viking Therapeutics Inc (NASDAQ:VKTX), and Insys Therapeutics Inc (NASDAQ:INSY) are among the stocks trending this morning. We’ll uncover why these stocks are making big morning moves and see what the investors in our database think about them.
Through our research we discovered that a portfolio of the 15 most popular small-cap picks of hedge funds beat the S&P 500 Total Return Index by nearly a percentage point per month on average between 1999 and 2012 (read the details here).
Let’s start with the combo of Hertz Global Holdings Inc (NYSE:HTZ) and Avis Budget Group Inc. (NASDAQ:CAR), which are both heading in the wrong direction this morning after Hertz was forced to lower its car rental revenue forecasts for 2016. Hertz cited pricing pressure due to vehicle oversupply as the reason why it expects a 2.5%-to-3.5% year-over-year car rental revenue decline for the first quarter, measured in terms of available car days. That quarterly performance led the company to lower its annual revenue guidance using the same measure to a range of flat-to-1.5% growth, down from the previous guidance of 1.5%-to-2.5% year-over-year growth. Shares of Hertz have tumbled by 6% as a result, while rival Avis Budget Group Inc. (NASDAQ:CAR)’s shares have taken a 4% tumble on the expectation that its results will be similarly impacted.
The news will come as a disappointment to some of the investors that we track, which collectively own large percentages of both companies. Hertz Global Holdings Inc (NYSE:HTZ) ranked as one of the top smid-cap stocks they were hoarding shares of, with 52 hedge funds owning 39.4% of the company’s shares. Likewise, Avis Budget Group Inc. (NASDAQ:CAR) ranked as one of their favorite small-cap stocks, with 33 investors holding 55.7% of its shares. Both stocks have struggled mightily in 2016, with their shares down by about 35% each.
Let’s move on to Sony Corp (ADR) (NYSE:SNE), the ADRs of which are trading up by over 4% this morning. The boost for the Japanese tech giant’s shares comes despite a report from Citi Research over the weekend which stated that Apple Inc. (NASDAQ:AAPL) will not deploy dual rear cameras in its upcoming phones to the extent that was expected, in an effort to reduce costs. Citi believes this will affect Sony greatly in the April-to-September period, as its long production lead times outpace the declining demand for its image sensors. Dual rear cameras are expected to be used in just 10%-to-20% of Apple’s next wave of iPhones, with previous reports suggesting that both single and dual rear camera models of the 5.5″ iPhone 7 Plus will be available, while only single rear cameras will be available for the 4.7″ iPhone 7.
In other Sony news, From Software’s Dark Souls 3, one of the more popular series on Sony’s video game consoles, releases tomorrow for the PlayStation 4. While the game is also available for PC and Xbox One, the first two games in the series were far more successful on Sony’s consoles, selling 3.34 million units on PS3 compared to just 1.71 million copies on the Xbox 360, according to data compiled by vgchartz. Sony Corp (ADR) (NYSE:SNE) was in the portfolios of 20 investors tracked by Insider Monkey as of December 31, with them owning $342 million worth of its ADRs. Mario Gabelli‘s GAMCO Investors held 5.99 million ADRs.
On the next page we’ll dig into the developments that have sent two pharmaceutical stocks hurtling in opposite directions this morning.