Why Valeant, Alibaba, Valspar, Starwood & MannKind Are All Up Today

The stock market is up slightly on Monday, with major U.S stock indexes posting gains of between 0.1% and 0.2%. Oil prices are accompanying the surge in the markets (or vice versa), as are Valeant Pharmaceuticals Intl Inc (NYSE:VRX), Alibaba Group Holding Ltd (NYSE:BABA), The Valspar Corp (NYSE:VAL), Starwood Hotels & Resorts Worldwide Inc (NYSE:HOT) and MannKind Corporation (NASDAQ:MNKD). Let’s take a look into the events driving the rise in these stocks, and into what the hedge funds in our database think about the companies in question.

At Insider Monkey, we track around 785 hedge funds and institutional investors. Through extensive backtests, we have determined that imitating some of the stocks that these investors are collectively bullish on can help retail investors generate double digits of alpha per year. The key is to focus on the small-cap picks of these funds, which are usually less followed by the broader market and allow for larger price inefficiencies (see more details about our small-cap strategy).

Back to the stocks that interest us today, let’s start with Valeant Pharmaceuticals Intl Inc (NYSE:VRX), which is up by about 9% this afternoon, with several pieces of news behind the run-up. First off, the company announced that CEO J. Michael Pearson is stepping aside. In addition, billionaire activist Bill Ackman has been appointed as a Director of the company’s Board. Mr. Ackman’s fund, Pershing Square, holds a 9% stake in Valeant which comprises about 30.71 million shares and has suffered notable losses due to the stock’s recent demise. Finally, management will issue a revised statement of the company’s financial results, seeking to correct the “improper conduct” of its former CFO (and interim CEO) Howard Schiller.

On top of Pershing Square, another 82 funds in our database were long Valeant Pharmaceuticals Intl Inc (NYSE:VRX) at the end of the fourth quarter, with their combined stakes accounting for more than a third of the company’s total shares. Another major investor of the stock is Jeffrey Ubben’s ValueAct Capital, which held 14.99 million shares of the company on December 31.

Next up is Alibaba Group Holding Ltd (NYSE:BABA), which is up by about 2.5% after the company announced that its transaction volume for its fiscal year 2016 (which will end on May 5) had surpassed the 3 trillion yuan ($463 billion) milestone. This figure implies 23% year-over-year growth in gross merchandise volume, and a tripling of the figure seen in fiscal year 2012. However, it also implies a slowdown in growth compared to the previous fiscal year’s 46% year-over-year rise. “What is behind this 3 trillion RMB milestone is an entire business ecosystem and fully-integrated Internet ecosystem that harmoniously works together to achieve tremendous capabilities,” said CEO Daniel Zhang, who has set a goal of reaching the 6 trillion yuan milestone by 2020.

Alibaba Group Holding Ltd (NYSE:BABA) saw a 28% increase in support among the funds in our database during the fourth quarter, with 77 fund with long positions in the stock on December 31. However, these stakes accounted for only 3.3% of the company’s total shares. Silver Lake Group, the firm run by Jim Davidson, Dave Roux and Glenn Hutchins, started a new stake in the company during the quarter, comprised of 24.46 million shares.

Three more stocks making moves upward today are detailed on the following page.

Shares of The Valspar Corp (NYSE:VAL) are trading up by more than 24% on Monday afternoon, on news that Sherwin-Williams Co (NYSE:SHW) will acquire the company for $113 per share in cash, or $11.3 billion, including the assumption of debt. This price represents a 41% premium to Valspar’s volume weighted average price over the past 30 days.

Among the funds that we track, 15 held long stakes in The Valspar Corp (NYSE:VAL) at the end of the fourth quarter. Their stakes, valued at $670.5 million on December 31, represented roughly 10.2% of the company’s outstanding stock. The largest position was the one held by David Cohen and Harold Levy’s Iridian Asset Management, which disclosed ownership of 5.54 million shares on January 26, up from 4.8 million shares held on December 31.

Starwood Hotels & Resorts Worldwide Inc (NYSE:HOT) is another one of Monday’s gainers making a move on takeover news, as it is up by more than 4.1% after the company received an improved takeover offer from Marriott International Inc (NASDAQ:MAR), which had been previously outbid by a consortium of Chinese investors led by the Anbang Insurance Group. The new offer values the operator of the Sheraton chain at $13.6 billion. Under the terms of the latest deal, shareholders of Starwood would receive $21.00 in cash and 0.80 shares of Marriott International for each Starwood share they hold.

52 funds among the approximately 785 that we track were long Starwood Hotels & Resorts Worldwide Inc (NYSE:HOT) as of the end of the fourth quarter. Among them was John Paulson’s Paulson & Co, which disclosed ownership of 11.6 million shares, making it the largest investor of record to date.

Finally, there’s MannKind Corporation (NASDAQ:MNKD), which is trading up by about 8% on Monday afternoon, continuing the recent rally for the stock. Over the past five trading days, shares of the company have gained more than 55%, while over the past month the stock has surged by almost 120%. Analysts have argued that the run-up has been mostly driven by investors’ excitement over the improved version of Afrezza, a potentially revolutionary diabetes treatment.

Among the funds that week keep track of, 11 were long MannKind Corporation (NASDAQ:MNKD) at the end of the fourth quarter. While hedge fund support was overly high, several funds were growing very bullish, including D E Shaw, which held a position of 1.06 million shares, up by more than 6,000%.

Disclosure: Javier Hasse holds no positions in any of the securities mentioned in this article.