Why Wells Fargo, Select Comfort, Array Biopharma, American Express, and More Are Trending

With this month’s two major catalysts now over, the markets are relatively quiet, as all three major indexes are slightly in the green at the start of this morning’s trading.

In this article, we’ll find out why investors are buzzing about two big Warren Buffett favorites, along with three other companies. Those stocks are Wells Fargo & Co (NYSE:WFC), Select Comfort Corp. (NASDAQ:SCSS), Array Biopharma Inc (NASDAQ:ARRY), American Express Company (NYSE:AXP), and Sonic Corporation (NASDAQ:SONC). We’ll also use the latest 13F filings to determine how the smart money is positioned in each stock.

At Insider Monkey, we track over 750 hedge funds, whose quarterly 13F filings we analyze and determine their collective sentiment towards several thousand stocks. However, 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).

In perhaps the first high profile case of clawbacks, Wells Fargo & Co (NYSE:WFC)‘s Board has agreed to claw back compensation from both current CEO John Stumpf and former head of retail Carrie Tolstedt. Stumpf will forfeit unvested stock awards of around $41 million and won’t make any salary while the investigation into Wells Fargo’s previous shady sales practices are ongoing. Tolstedt will forfeit unvested stock awards of around $19 million and won’t receive any bonus for 2016. Bulls hope the clawbacks can put the public furor over the scandal to rest and that Wells Fargo can go back to becoming a boring, high-quality dividend stock again. Of the 749 hedge funds that we track which filed 13Fs for the June quarter, 88 of them had a long position in Wells Fargo & Co (NYSE:WFC), down by two funds from the previous reporting period.

Select Comfort Corp. (NASDAQ:SCSS) shares are 7.56% in the red due to its peer, Tempur Sealy International Inc (NYSE:TPX), plunging after it issued soft 2016 guidance. For the year, Tempur Sealy expects net sales to be down by 1%-to-3% compared to 2015 and for adjusted EBITDA to be between $500 million and $525 million, well below the market’s estimates. Given that many of the same factors affect both companies, some traders are evidently taking a cautious stance with regards to Select Comfort Corp as well. 12 funds that we track were bullish on Select Comfort Corp. (NASDAQ:SCSS) at the end of June.

On the next page, we’ll examine the latest on Array Biopharma, American Express, and Sonic Corporation.

Array Biopharma Inc (NASDAQ:ARRY) is in the spotlight after the company upsized its public offering by 15% to 18.4 million shares priced at $6.25 each, with gross proceeds expected to amount to $115 million. As is customary, the deal’s underwriters will have a 30-day option to buy additional shares, up to 2.76 million. Array will use the proceeds to finance R&D and to invest in its commercial capabilities, as well as for general corporate purposes. Julian Baker and Felix Baker’s Baker Bros. Advisors owned 4.31 million shares in Array Biopharma Inc (NASDAQ:ARRY) on June 30.

Traders are watching American Express Company (NYSE:AXP) after Barron’s published a bullish column on the financial company. In the article, writer Johanna Bennett thinks that American Express has more upside given its 150 million-share buyback plan, its recent 10% dividend hike, and the company’s bargain 11.4-times 2017 estimated earnings multiple. American Express also recently received a favorable federal appeals court ruling that could allow it to prevent merchants from asking customers to use lower-cost cards from competitors. Warren Buffett‘s Berkshire Hathaway reported owning a stake of over 151 million shares in American Express Company (NYSE:AXP) as of the end of the second quarter.

Sonic Corporation (NASDAQ:SONC) shares are 5.5% in the red after the company issued soft preliminary results for its fiscal fourth quarter. For the period, Sonic has estimated that system-wide same-store sales inched lower by 2%, and that adjusted net income per diluted share will come in between $0.43 and $0.45. CEO Cliff Hudson added, “the shortfall was largely driven by lower-than-expected traffic, reflecting lower consumer spending in restaurants and continued aggressive competitive activity.” The number of funds in our database with holdings in Sonic Corporation (NASDAQ:SONC) rose by two during the second quarter to 18 at the end of June.

Disclosure: None