Why Twitter, Wells Fargo, and Three Other Stocks Are in Spotlight on Friday

The markets are quiet today as all three index futures are just moderately lower. Uncertain of direction, many traders are on the sidelines and awaiting news from the informal OPEC/Russia meeting next week before jumping in the bull or bear camp.

Among the stocks that are in the spotlight today are Twitter Inc (NYSE:TWTR), Wells Fargo & Co (NYSE:WFC), Apple Inc. (NASDAQ:AAPL), Finish Line Inc (NASDAQ:FINL), and Yum! Brands, Inc. (NYSE:YUM). Let’s find out why these stocks are on investors’ radars and take a look at the smart money sentiment towards them.

We believe that imitating hedge funds and other large institutional investors can be helpful in identifying stocks capable of outperforming the broader market. Through extensive research that covered portfolios of several hundred large investors between 1999 and 2012, we determined that following the small-cap stocks that large money managers are collectively bullish on, can generate monthly returns nearly 1.0 percentage points above the market (see the details here).

Twitter Inc (NYSE:TWTR)’s stock has surged by over 20% after CNBC tweeted the following: “CNBC reports that Twitter has received expressions of interest, is moving closer to sale.” Although CNBC said that no deal was imminent, David Faber thinks a sale could be announced by the end of 2016. In other news, Mark Mahaney of RBC Capital has just lowered his price target to $14 from $17 per share and downgraded shares of the social media company to ‘Underperform’ from ‘Sector Perform’. Mahaney said their “belief that Twitter’s value proposition to advertisers could be waning, based on [their] recent advertiser survey data”. However, the analyst reaffirmed his views that “Twitter is a unique asset with a strong value proposition to core users”. Gilchrist Berg‘s Water Street Capital raised its position in Twitter Inc (NYSE:TWTR) by 61% to over 1.12 million shares in the second quarter.

After the recent uproar over the bank’s past questionable sales tactics, Wells Fargo & Co (NYSE:WFC) CEO John Stumpf has resigned from the Federal Reserve Bank of San Francisco’s advisory council. Some investors believe Stumpf likely resigned due to political pressure, as several Senators recently called for Stumpf’s term in the council to not be renewed. It remains to be seen whether there will enough pressure to force Stumpf to resign as the head of Wells Fargo. Although some politicians have been calling for the move and Warren Buffett has refused to comment on the bank until November, Stumpf has unlocked a lot of value for shareholders in his term. Of the around 749 funds we track, 88 were long Wells Fargo & Co (NYSE:WFC) at the end of June, down by two funds from the previous quarter.

On the next page, we find out why Apple, Finish Line, and Yum! Brands are in the spotlight.

Apple Inc. (NASDAQ:AAPL) is trending after Reuters reported that Japanese regulators are considering filing suit/taking action against Apple for potential antitrust violations concerning Apple’s supply agreements with Japan’s top telecoms. According to some complaints, the telecoms refused to sell older surplus iPhones to third party retailers and thus hurt some of the smaller competitors. Any meaningful negative action could hurt Apple’s profit margins in Japan, which has been one of the tech giant’s more profitable markets so far. The number of investors tracked by us with holdings in Apple Inc. (NASDAQ:AAPL) fell by 36 quarter-over-quarter to 116 at the end of June.

Finish Line Inc (NASDAQ:FINL) earned $0.53 per share on revenue of $509.4 million in its fiscal second quarter, meeting the bottom-line expectations and beating the top-line consensus estimate by $14.36 million. Sales for the time period were brisk, as revenues rose by 5.4% year-over-year due to a 5.1% year-over-year rise in comparable store sales. For the fiscal fiscal 2017, Finish Line expects similar trends, with comparable store sales guidance standing between 3% and 5% and adjusted EPS coming in between $1.50 and $1.56. A total of 21 funds from our database were long Finish Line Inc (NASDAQ:FINL) at the end of June, up by five funds from the previous quarter.

Investors are talking about Yum! Brands, Inc. (NYSE:YUM) after RBC downgraded the stock to ‘Outperform’ from ‘Top Pick’ mainly for valuation reasons. Yum shares have surged by 26% year-to-date and now trade for 21.6 times forward earning. Although RBC downgraded the stock, the analysts are still long-term bullish and have kept their price target of $97 per share. At the end of June, 46 funds tracked by Insider Monkey were long Yum! Brands, Inc. (NYSE:YUM), compared to 51 fund a quarter earlier.

Disclosure: none