A Closer Look at Five Stocks Trending on Friday

The US stock market plunged following Fed chair’s Janet Yellen’s speech at Jackson Hole, where she expressed confidence that interest rate hiked are expected in the near term. Meanwhile, oil traders are a bit conflicted after Iran said that it would cooperate with OPEC to stabilize the crude market while Saudi Arabia’s energy minister said, “We don’t believe any significant intervention in the market is necessary”.

Amidst the uncertain backdrop, five stocks, Petroleo Brasileiro SA Petrobras (ADR) (NYSE:PBR), Splunk Inc (NASDAQ:SPLK), Brocade Communications Systems, Inc. (NASDAQ:BRCD), Tesla Motors Inc (NASDAQ:TSLA), and SolarCity Corp (NASDAQ:SCTY) are trending on the back of different developments. Let’s take a closer look at why each stock is in the spotlight and examine what the investors from our database think about them.

At Insider Monkey, we track around 750 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 the details here).

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Petrobras Cuts Workforce 

Petroleo Brasileiro SA Petrobras (ADR) (NYSE:PBR) is in the spotlight today after Reuters reported that 6,100 of Petrobras workers had agreed to a voluntary layoff program. Approximately 12,000 of Petrobras employees, which account for 21% of the company’s workforce, are currently eligible for the voluntary program in total. If all the eligible employees accept, Petrobras would save 33 billion reais in salaries over four years. That would save Petrobras around $9 billion when factoring in the upfront costs of the layoffs, which Petrobras could use to pay down its debt. A total of 23 funds tracked by us were long Petroleo Brasileiro SA Petrobras (ADR) (NYSE:PBR) at the end of June, unchanged from the previous quarter.

Splunk Dives on Earnings

Although its fiscal second quarter was better than analyst estimates, Splunk Inc (NASDAQ:SPLK)’s shares are nevertheless 10% in the red. For the quarter ended July 31, Splunk posted earnings of $0.05 per share on revenue of $212.8 million, beating estimates by $0.02 and $12.28 million, respectively. Revenue rose by 43.5% year-over-year and Splunk’s management raised full-year total revenue guidance to the range of $910 million to $914 million from the previous range of $892 million to $896 million. However, the market was apparently expecting better numbers given Splunk’s 10% year-to-date rally. Of the around 750 funds in Insider Monkey’s database, the number of investors with holdings in Splunk Inc (NASDAQ:SPLK) rose by one quarter-over-quarter to 32 at the end of June.

On the next page, we find out why Brocade Communications Systems, Tesla Motors, and SolarCity Corp are buzzing.

Brocade in the Red After Reporting Fiscal Third Quarter Results

Brocade Communications Systems, Inc. (NASDAQ:BRCD) is another victim of high market expectations today as its stock is in the red despite the company reporting solid results for the fiscal third quarter. During the three months, Brocade earned $0.21 per share on revenue of $591 million, versus estimates of $0.16 per share and sales of $573.43 million. Overall sales went up by 7.1% year-over-year as the 36% jump in IP Networking sales more than offset the 9% decline in SAN Products revenue. For the full year, Brocade expects operating cash flow of $140 million to $160 million and operating margin to be between 19% and 20.5%. At the end of June, 28 funds from our database owned shares of Brocade Communications Systems, Inc. (NASDAQ:BRCD), compared to 36 funds a quarter earlier. 

Musk’s Companies Closer to Combining

Tesla Motors Inc (NASDAQ:TSLA)‘s proposed merger with SolarCity Corp (NASDAQ:SCTY) just moved a little closer to the finish line after the FTC gave the regulatory antitrust thumbs up to the deal. To be fair, very few investors were expecting the FTC to cause any trouble given the lack of overlap between Tesla and SolarCity. The much harder part for Elon Musk and Co will be to persuade Tesla shareholders to approve the deal. The lack of synergies and SolarCity’s cash burn could cause Tesla to lose focus on its 500,000 vehicles per year production target by 2018. Among the investors we track, 36 funds were long Tesla Motors Inc (NASDAQ:TSLA) and 26 funds had a bullish position in SolarCity Corp (NASDAQ:SCTY) at the end of June.

Disclosure: None