Although the Republicans added to their majority in the Senate, we officially have more checks in our government after the Democrats won control of the House of Representatives on Tuesday. Given the importance of the government to the stock market, several equities, as well as several other stocks, including Netflix Inc. (NASDAQ:NFLX), Apple Inc. (NASDAQ:AAPL), Virtu Financial Inc. (NASDAQ:VIRT), Investment Technology Group Inc. (NYSE:ITG), and Etsy Inc. (NASDAQ:ETSY) are in the spotlight. Let’s analyze.
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s flagship best performing hedge funds strategy returned 17.4% year to date and outperformed the market by more than 14 percentage points this year. This strategy also outperformed the market by 3 percentage points in the fourth quarter despite the market volatility (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
Netflix Inc. (NASDAQ:NFLX) is up over 4% after the Democrats won the House of Representatives. With the power change, the potential prospect of net neutrality (if the Senate also plays along) in the future looks more likely to some investors. A rollback of net neutrality allows internet service providers to slow the speed of some sites down, and very few sites use more bandwidth than Netflix Inc. (NASDAQ:NFLX), which is famous among its users for serving up binge-watching shows. Some investors believe a return to less regulation would likely allow Netflix to pay less in fees to ISPs. In terms of smart money sentiment among the around 650 top funds we track, the number of bullish hedge fund positions decreased by 9 lately. NFLX was in 66 hedge funds’ portfolios at the end of the second quarter of 2018. There were 75 hedge funds in our database with NFLX holdings at the end of the previous quarter.
Apple Inc. (NASDAQ:AAPL) is making some news after Reuters reported that the company isn’t in talks with Qualcomm ‘at any level’ to settle their legal dispute over potential unpaid royalties of $7 billion. Apple has in the past used Qualcomm’s chips in the iPhone but recently sued the chipmaker, arguing that Qualcomm’s patent license fee method of charging a cut of the selling price of mobile phones was illegal. If the two don’t settle, the two could potentially go to trial. Apple shares are up 1% in late morning trading. Warren Buffett’s Berkshire Hathaway was a major shareholder of Apple Inc. (NASDAQ:AAPL), with a stake worth $46,639.6 millions reported as of the end of June.
Investment Technology Group Inc. (NYSE:ITG) shares are up 8% after Virtu Financial Inc. (NASDAQ:VIRT) agreed to buy it for $30.30 in cash per share. The transaction has been unanimously approved by the boards of both companies and is expected to close in the first half of next year. In terms of reasons for the deal, Virtu Financial Inc. (NASDAQ:VIRT) believes it could realize $123 million of net pre-tax expense savings in addition to $125 million in capital synergies. The combination would further diversify Virtu and increase the stability of its future earnings.
At the end of the third quarter, a total of 20 of the hedge funds tracked by Insider Monkey were bullish on Virtu, a change of 82% from the previous quarter. Meanwhile, Investment Technology Group Inc. (NYSE:ITG) was in 13 top fund portfolios we track at the end of Q2.
Etsy Inc. (NASDAQ:ETSY) shares have skyrocketed 23% after the company reported a sizzling third quarter. EPS for the period of $0.15 was more than double the consensus of $0.07, and revenue of $150.37 million also exceeded the estimate of $149.9 million. In more good news, Etsy’s board authorized a $200 million stock buyback program and the company raised FY18 sales guidance to $596-$600 million from the previous $587-$596 million. At Q3’s end, a total of 30 of the hedge funds tracked by Insider Monkey held long positions in Etsy Inc. (NASDAQ:ETSY), a change of 3% from the second quarter of 2018.
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