Although it is rapidly approaching 13F season and traders are closely watching oil stocks due to the rising Middle East tensions, several stocks such as Alibaba Group Holding Limited (NYSE:BABA), Altaba Inc. (NASDAQ:AABA), Cisco Systems, Inc. (NASDAQ:CSCO), Agios Pharmaceuticals Inc (NASDAQ:AGIO), and Virtusa Corporation (NASDAQ:VRTU) are in the spotlight for various reasons. Let’s analyze why traders are watching each stock and how the smart money is positioned among them.
Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the market by 32 percentage points since May 2014 through March 12, 2019 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.
Aside from the U.S. -China trade war which could hurt China’s economy and slow e-commerce growth, traders are watching both Alibaba Group Holding Limited (NYSE:BABA) and holding company Altaba Inc. (NASDAQ:AABA) after the later announced that it will begin selling Alibaba shares on May 20, 2019. Given that the company has previously announced this before, Alibaba shares are down just fractionally. While liquidations are never good in terms of supply and demand, Alibaba has a lot going for it given its huge share of China’s e-commerce market. Analysts have an average price target of $207.57 per share, giving it potential upside. Of the around 700-740 elite funds we track, 113 funds owned $11.47 billion of Alibaba Group Holding Limited (NYSE:BABA) and 73 top funds were long Altaba Inc. (NASDAQ:AABA) at the end of December.
Cisco Systems, Inc. (NASDAQ:CSCO) shares are up 2.7% in after hours after the company reported a relatively solid Q3, with adjusted EPS of $0.78 on sales of $12.96 billion, beating the Street by $0.01 per share and $70 million. Cisco’s products division grew around 7% and its services division grew 3%. In terms of Q4 guidance, the company expects EPS of $0.80-$0.82, in-line with the average estimate of $0.81. Revenue is seen at $13.43-$13.69 billion, a little higher than the consensus of $13.29 billion. The number of elite funds with holdings in Cisco Systems, Inc. (NASDAQ:CSCO) fell by 3 quarter-over-quarter to 55 at the end of December.
Agios Pharmaceuticals Inc (NASDAQ:AGIO) shares are up almost 20% in after market trading on Wednesday after the company announced that the randomized phase 3 ClarIDHy trial of TIBSOVO achieved its primary endpoint in previously treated IDH1 mutant cholangiocarcinoma patients. Specifically, TIBSOVO demonstrated statistically significant improvement in progress free survival versus placebo and the the safety profile from the study is consistent with published Phase 1 data in patients with IDH1 mutant solid tumors. In terms of the future, the supplemental new drug application is on track by the end of this year.
Virtusa Corporation (NASDAQ:VRTU) shares are in the red in after hours on Wednesday after the company reported a soft fourth quarter. Adjusted EPS was $0.46 on sales of $327.63 million, missing by $0.16 per share and $3.28 million. CFO Ranjan Kalia said, “Looking ahead, our FY 2020 guidance assumes a slower than previously expected start to the fiscal year, but we are well-positioned to generate double-digit revenue growth, non-GAAP margin accretion of 100 basis points, and strong non-GAAP EPS growth of 27% at the midpoint of our guidance.”
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