It’s been a rather green day on Wall Street as all three major indexes are positive. The Dow Jones is up over 150 points while the S&P 500 is up 0.84%. Among the stocks traders are watching include Apple Inc. (NASDAQ:AAPL), Biogen Inc. (NASDAQ:BIIB), Amgen, Inc. (NASDAQ:AMGN), Deckers Outdoor Corp (NASDAQ:DECK), and Diamondback Energy Inc (NASDAQ:FANG). Let’s analyze why each stock is in the spotlight and how the smart money is positioned.
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.
Apple Inc. (NASDAQ:AAPL) is on watch after after Craig Irwin of Roth Capital Partners said on CNBC that Apple apparently had an informal bid feeler for Tesla at around $240 a share in 2013. Irwin said, “The reason we weren’t more bearish when we rolled coverage back out several months back, is the bid from Apple. Around 2013, there was a serious bid from Apple at around $240 a share. This is something we did multiple checks on. I have complete confidence that this is accurate”. In terms of smart money holdings, Warren Buffett’s Berkshire Hathaway is a big holder of Apple. Buffett is a long term shareholder and his position in the tech company shows confidence in Apple’s future. Buffett has said Apple investing in Tesla would be a poor idea before, however.
Biogen Inc. (NASDAQ:BIIB) is trending after Credit Suisse initiated an ‘underperform’ rating on the drug company. The bank is cautious due to a ‘declining base business’ with underappreciated competitive threats in the SMA and MS franchises. Although BIIB’s multiple is ‘at a recent low’ and management is prioritizing share repurchases, the analyst would like to see a more robust pipeline and for management to potentially ‘engage in a more transformative M&A’. Of the around 700-740 elite funds we track, 57 funds owned $3.24 billion of Biogen Inc. (NASDAQ:BIIB) on December 31, versus 56 funds and $3.43 billion respectively on September 30.
While the bank is ‘underperform’ on Biogen, it is bullish on Amgen, Inc. (NASDAQ:AMGN). The analyst writes, “Amgen is attractive relative to peers for its (1) underappreciated biosimilars business, which could help change the projected base business revenue decline; (2) relative stability vs. large-cap peers, (3) varied and promising pipeline (with novel assets in oncology and immunology), and (4) compelling valuation. Amgen has a good balance of returning capital to shareholders (repurchases, dividends), pipeline, and ability (yet not urgent need) to do M&A.” 46 elite funds had a bullish position in Amgen, Inc. (NASDAQ:AMGN) as of the most recent 13-F reporting period.
Deckers Outdoor Corp (NASDAQ:DECK) is trending after analysts at Bank of America upgraded the stock to ‘Buy’ from ‘Neutral’ and raised its price target to $180 from $150. Although DECK shares have risen sharply over the last two years, the bank sees ‘upside risk to consensus EPS’ and expects double digit average EPS growth over the next two years.
Diamondback Energy Inc (NASDAQ:FANG) is on watch after Bank of America added it to its ‘US 1 list’ and said that “Risk/reward hard to ignore as buyback kicks in; PO $170 While FANG share price has outperformed very recently (+3.5% over the past month versus -1.4% for S&P 500; -5.1% sector/IXE), we believe shares are poised to outperform as meaningful buyback kicks in.”Oil prices have risen somewhat after Middle Eastern tensions have risen. Although the probability of an Iran-American war seems distant, rhetoric between the two countries have certainly increased. Any sort of increase in tension could send oil higher as the Middle East is a big producer of oil. If oil prices go higher, oil stocks could go higher too. Of the around 700-740 elite funds we track, 44 funds owned $2.13 billion of Diamondback Energy Inc (NASDAQ:FANG) on December 31, versus 37 funds and $1.33 billion respectively on September 30.
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