The market is enduring a rough day following the Fed failing to pull the trigger yesterday on an expected and long-awaited interest rate hike. Among the day’s biggest losers are Parsley Energy Inc (NYSE:PE), La Quinta Holdings Inc (NYSE:LQ), and Freeport-McMoRan Inc (NYSE:FCX), each trading on high volume. We’ll dig into these nose-diving stocks to see if they’re unwitting casualties of the current market jitters or have deeper issues dragging them down.
Parsley Energy Inc (NYSE:PE)
- Investors with Long Positions (as of June 30): 25
- Aggregate Value of Investors’ Holdings (as of June 30): $381 million
- Percentage of Shares Owned by Investors: 20.20%
Let’s start with Parsley Energy, which is trading down by 8.04% today after trending upwards all week. The oil and natural gas company, which has assets in the Permian Basin, announced a public offering of 13 million shares of common stock, which will send the above figure of over 20% share ownership by the investors we track plummeting along with the stock. The company announced that it will use the proceeds from the offering to pay down some of its debt and to fund its capital expenditures, which could include acquisitions.
As far as energy stocks go, Parsley Energy Inc (NYSE:PE) was having a pretty solid year up until today, trading slightly up year-to-date. Hedge funds tracked by Insider Monkey exhibited mixed feelings towards the stock however. While ownership was up by two funds during the second quarter, the value of their aggregate holdings declined by $71 million, even though the stock was up by about 9% during the quarter, so there was a good deal of profit-taking. Each of the top two shareholders of the stock within our database trimmed their holdings during the second quarter. They were Stuart J. Zimmer’s Zimmer Partners and Israel Englander’s Millennium Management, and owned 5.04 million shares and 4.22 million shares respectively.
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La Quinta Holdings Inc (NYSE:LQ)
- Investors with Long Positions (as of June 30): 29
- Aggregate Value of Investors’ Holdings (as of June 30): $385 million
- Percentage of Shares Owned by Investors: 12.90%
La Quinta Holdings is the worst offender of the day among the stocks in this article, as its shares have declined by 14.87%. There was a bevy of news surrounding the company last night, beginning with the fact that CEO Wayne Goldberg stepped down, to be replaced on an interim basis by Chief Financial Officer Keith Cline. The departure is certainly unexpected, and was accompanied only by the former leader saying that he had achieved his goals at the company and that it was well positioned for future growth.
Not everyone would agree with that assessment however, which is highlighted by the fact that La Quinta Holdings Inc (NYSE:LQ) also announced lowering its guidance for 2015 yesterday in terms of RevPAR growth on a system-wide comparable hotel basis and Pro Forma Adjusted EBITDA. The former was lowered to 3.5%-to-4.5% from 4.5%-to-5.5%, while the latter was lowered to $393 million-to-$400 million from $398 million-to-$404 million. La Quinta seemingly tried to soften the news by announcing a $100 million share buyback program, but given the company’s debt load, this was also a questionable decision.
Similar to Parsley Energy, there were two more shareholders of La Quinta Holdings within our database by the end of the second quarter. However, the value of their collective holdings likewise slid, by nearly $169 million, while shares declined by just 3.5% during the quarter, so there was a large flight of capital from the stock. Ken Griffin’s Citadel Investment Group cut its position in the stock by 64% during the second quarter to just over 2.00 million shares, while Tom Sandell cut his position by 57% to 586,450 shares, though it still ranked as one of his top small-cap picks.
Freeport-McMoRan Inc (NYSE:FCX)
- Investors with Long Positions (as of June 30): 41
- Aggregate Value of Investors’ Holdings (as of June 30): $582 million
- Percentage of Shares Owned by Investors: 3.00%
Lastly is Freeport-McMoRan Inc (NYSE:FCX), down by 9.46% after it was revealed that the mining company would sell up to $1 billion in shares, which comes hot on the heels of its share sale in August, when it sold 96.7 million shares for $1 billion in gross proceeds. Freeport-McMoRan is the latest target of activist investor Carl Icahn, who took a stake of 88.0 million shares towards the end of August, calling the stock “undervalued”. Shares gained over 25% after his position was revealed and have trended even further up since then, even factoring in today’s losses.
Even before Icahn’s big move, funds in our database were showing extreme bullishness towards Freeport-McMoRan during the second quarter, as ten additional firms held long positions in the stock by the end of the period, and the aggregate value of investors’ holdings more than doubled, despite a slight decline in the value of the stock. However, this is a case where the smart money has not been rewarded thus far, as shares plummeted by over 50% during the third quarter before Icahn’s intervention. Yesterday, we profiled Freeport-McMoRan as a stock that could suffer from a rate hike, based on JPMorgan Chase & Co. (NYSE:JPM)’s list of the 25 companies with the most floating-rate debt on their balance sheets. Coincidentally, the stock has tumbled today despite the lack of said rate hike.
As of June 30, Stanley Druckenmiller’s family office Duquesne Capital held the largest position in Freeport-McMoRan within our database, at just under 3.55 million shares, which also happened to be a new position. Benjamin A. Smith’s Laurion Capital Management also opened a large new position during the quarter, of 2.02 million shares.
Disclosure: None
