The markets are rising on Wednesday, with the S&P up by about 0.55%, the NASDAQ up by roughly 1.2% and the Dow almost flat (though very slightly down). Among the stocks driving the surges in the markets, investors can count Trimble Navigation Limited (NASDAQ:TRMB), Open Text Corporation (USA) (NASDAQ:OTEX), Prospect Capital Corporation (NASDAQ:PSEC), Nuance Communications Inc. (NASDAQ:NUAN), and Criteo SA (ADR) (NASDAQ:CRTO) as some of the main drivers. But, what’s behind the substantial gains seen in these stocks today? And, how do hedge funds feel about these companies? Let’s find out.
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, we’ve got Trimble Navigation Limited (NASDAQ:TRMB), up by more than 16.3% in Wednesday trading following the announcement of the company’s fourth quarter financial results. After the market closed on Tuesday, the firm posted the results, which amounted to earnings of $0.27 per share, $0.02 above the consensus estimate, on revenue of $559.7 million, which also beat the Street’s expectations of $540.87 million. Also helping the stock’s gains was an upgrade by Needham, which boosted its rating on the stock to ‘Buy’ and set a $24.00 price target on it.
Hedge funds seem to be increasingly bullish on Trimble Navigation Limited (NASDAQ:TRMB). Among the over 730 funds that we keep track of, 25 disclosed long positions in the company as of the end of the third quarter of 2015, up by 38.8% quarter-over-quarter.
Open Text Corporation (USA) (NASDAQ:OTEX) is also surging on its earnings report, trading up by more than 10.6% in the early afternoon. After the bell rang on Tuesday, the software products and services provider announced earnings of $1.01 per share on revenue of $465.35 million for its second quarter of fiscal year 2016, well above the Street’s consensus of $0.90 per share and $459.53 million respectively.
No doubt pleased with the news is Israel Englander, as his fund, Millennium Management, disclosed ownership of 337,848 shares of Open Text Corporation (USA) (NASDAQ:OTEX) as of September 30.
On the next page, we will look into the events driving the spikes in Prospect Capital Corporation (NASDAQ:PSEC), Nuance Communications Inc. (NASDAQ:NUAN), and Criteo SA (ADR) (NASDAQ:CRTO).
After hitting an all-time low this week, Prospect Capital Corporation (NASDAQ:PSEC) has rebounded by 12% on Wednesday afternoon. On Tuesday evening, the firm reported earnings of $0.28 per share for its second quarter of fiscal year 2016, $0.03 above the consensus estimate, on revenue (or total investment income) of $209.19 million, considerably higher than the expected $192.85 million. In addition, management declared a monthly dividend of $0.0833 per share, in line with previous ones.
Among the funds in our database, one that seems particularly optimistic about Prospect Capital Corporation (NASDAQ:PSEC) is Matt Sirovich and Jeremy Mindich’s Scopia Capital, which declared holding 2.25 million shares of the company, worth more than $16 million as of the end of September.
Next up is Nuance Communications Inc. (NASDAQ:NUAN), up by 7.43% on Wednesday. On Tuesday evening, the mid-cap tech company reported its first quarter of fiscal year 2016 financial results, which included earnings of $0.36 per share and revenue of $494.87 million, both above the Street’s estimates of $0.32 per share in earnings and $491.23 million in revenue. Management also boosted its EPS guidance for the full 2016 fiscal year, from between $1.35 and $1.45 to a range of $1.41 to $1.51. The consensus among analysts stands at $1.43. Revenue guidance was maintained at $1.98 billion-to-$2.03 billion.
Among the funds betting on Nuance Communications Inc. (NASDAQ:NUAN), we could highlight Columbus Circle Investors, the fund currently managed by Clifford G. Fox. The firm recently said that, as of the end of 2015, it held 4.46 million shares of the company, worth roughly $88.7 million. The firm acquired 222,079 shares of Nuance over the fourth quarter of last year.
Finally, there’s Criteo SA (ADR) (NASDAQ:CRTO), up by almost 23% today. Before the market opened, the Paris, France-based company posted EPS of €0.66 ($0.74), €0.26 ($0.29) above the consensus estimate, while revenue came in at €145.75 million ($163.65 million), up by 51.3% year-over-year, and €7.55 million ($8.49 million) higher than expected.
Once again, Columbus Circle Investors was among the largest hedge fund investors of Criteo SA (ADR) (NASDAQ:CRTO) in our database, even in spite of the 22% reduction to its stake during the fourth quarter. As of December 31 the firm held 951,474 shares of the company, worth about $37.67 million.
Disclosure: Javier Hasse holds no positions in any of the securities mentioned in this article.