5 Stocks That Have Investors Buzzing Today

It’s a merger Monday for Allergan plc (NYSE:AGN), Diebold Inc. (NYSE:DBD) and Pfizer Inc. (NYSE:PFE), while Lions Gate Entertainment Corp. (NYSE:LGF) begins the week on a sour note after disappointing returns from Katniss Everdeen’s big screen finale in Hunger Games: Mockingjay Part 2. Meanwhile, Chipotle Mexican Grill Inc. (NYSE:CMG) continues to redeem itself after an E. coli outbreak at its Washington and Oregon stores. Let’s dig into the details of these developments below.

We pay attention to hedge funds’ moves because our research has shown that hedge funds are extremely talented at picking stocks on the long side of their portfolios. It is true that hedge fund investors have been underperforming the market in recent years. However, this was mainly because hedge funds’ short stock picks lost a ton of money during the bull market that started in March 2009. Hedge fund investors also paid an arm and a leg for the services that they received. We have been tracking the performance of hedge funds’ 15 most popular small-cap stock picks in real time since the end of August 2012. These stocks have returned 102% since then and outperformed the S&P 500 Index by around 53 percentage points (see the details here). That’s why we believe it is important to pay attention to hedge fund sentiment; we also don’t like paying huge fees.

Drugmaker Pfizer Inc. (NYSE:PFE) is lagging by 2.02% in early afternoon trading today, while Allergan plc (NYSE:AGN) has fallen by 2.17%, following the announcement of their $160 billion merger (including debt) that is expected to rake in over $25 billion in annual operating cash flow beginning in 2018. Under the terms of the deal, an 11.3-for-one share split will be executed so that each Allergan shareholder will receive 11.3 shares of the combined company for each Allergan share, while Pfizer stockholders will receive one share of the combined company for each of their Pfizer shares. The combined company will be renamed “Pfizer plc”.

After the deal closes, New York-based Pfizer is expected to take advantage of the lower tax rate of between 17% and 18% in Ireland by moving its principal executive offices there, but keeping its New York headquarters. What is bothering investors of late is Pfizer’s impending move that will separate the combined company’s “innovative” and “established” drugs by no later than 2018. The deal is expected to close in 2016.

Out of 730 funds in our database, 151 held shares in Allergan amounting to 19.10% of its shares as of September 30. Healthinvest Partners Ab holds 761,000 shares in Pfizer valued at $23.9 million.

Diebold Inc. (NYSE:DBD) has withdrwawn by 5.25% after it announced a merger with German corporation Wincor Nixdorf Aktiengesellschaft, under which Diebold will offer Wincor Nixdorf shareholders €38.98 ($41.38) in cash, plus 0.434 Diebold common shares per Wincor Nixdorf share. The deal, which is valued at approximately $1.8 billion, or €1.7 billion (including net debt), will see the combined companies operate under the name “Diebold Nixdorf”.

“Our new company will be well positioned for growth in high-value services and software – particularly in the areas of managed services, branch automation, mobile and omnichannel solutions — across a broader customer base,” Diebold President and CEO Andy Mattes said.

Diebold Inc.(NYSE:DBD) provides self-service delivery, value-added services and software primarily to the financial industry, while Wincor Nixdorf AG (FWB:WIN) provides IT solutions and services to banks and the retail industry. At the end of September, ten funds in our database held 13.90% of Diebold’s outstanding stock. Daruma Asset Management holds 1.87 million shares of Diebold, valued at $55.8 million.

Lions Gate Entertainment Corp. (NYSE:LGF), with a market capitalization of $5 billion, is now up by 1.14% despite disappointing weekend earnings for the second part of its Mockingjay finale to the Hunger Games trilogy. It opened $19 million shy of its estimated ticket sales, according to Bloomberg News. Meanwhile, the movie was only ranked at 70% on Rotten Tomatoes, with an average rating of 6.4 out of 10. The motion picture and television library of the company includes more than 15,000 titles, and it has a $1 billion-a-year home entertainment business. MHR Fund Management holds 40.21 million shares of the company valued at $1.48 billion.

Lastly, after a selloff last week due to an E. Coli outbreak at some of its U.S restaurants, Chipotle Mexican Grill Inc. (NYSE:CMG) shares are up by 4.38% today after the company’s top executive offered his “sincerest apologies.”

Before the week ended last week, the company issued a press release related to the investigation of the E.coli incident at 11 of its establishments in two states. Even with the investigation ongoing, the company assured its customers that it has replaced ingredients, changed its food preparation processes, and executed deep cleaning in the affected areas.

“We offer our sincerest apologies to those who have been affected,” Chipotle co-CEO and Chairman Steve Ells said. “We will leave no stone unturned to ensure the safety of our food – from enhancing the safety and quality assurance program for all of our fresh produce suppliers, to examining all of our food safety procedures from farm to restaurant, and expanding testing programs for produce, meat and dairy items before they are sent to our restaurants.”

By the end of September, 28 funds in our database held 4.90% of the company’s outstanding stock, down from 36 funds owning shares a quarter earlier.

Disclosure: None