Dyax, Bill Barrett, MeetMe: What You Need To Know About Today’s Hottest Stocks

Shares of Dyax Corp. (NASDAQ:DYAX), Bill Barrett Corporation (NYSE:BBG), and MeetMe Inc (NASDAQ:MEET) are up by 12.5%, 11.1%, and 15% respectively in afternoon trading today, at a time when the S&P 500 is up by just 0.9% and the NASDAQ is up by 1%. Given the relative strength of the three, let’s find out why investors are hitting the buy buttons and examine notable hedge fund activity concerning them, if any.

Dyax Corp. (NASDAQ:DYAX), a drug company focused on developing orphan treatments for rare blood disorders, is up as sentiment around the sector improves. The iShares NASDAQ Biotechnology Index (ETF) (NASDAQ:IBB) is up by more than 2% as investors become less concerned about potential pricing ceilings and new regulations. Being able to optimize prices for the market is very important for Dyax Corp, as the company doesn’t exactly make drugs for the masses (it makes orphan drugs). Shares of the company have done very well so far, with shares up by over 70% year-to-date.

Within our extensive database of 730 elite funds, hedge funds are bullish on Dyax Corp. (NASDAQ:DYAX). 33 elite funds were long Dyax at the end of the second quarter, up by five from the previous quarter. The funds’ collective holdings in Dyax was $714.6 million (representing 18.5% of the float), up by $5.3 million from the end of March. Julian Baker and Felix Baker‘s Baker Bros Advisors, one of the top performing funds this year, increased its position in the stock by 32% to 7.93 million shares during the April-to-June period.

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.

On the next page we’ll look at why investors are excited about Bill Barrett and MeetMe.

Bill Barrett Corporation (NYSE:BBG), an independent E&P energy company with activities mainly in the DJ Basin, is up as investors speculate on the future direction of WTI. While the forward month contract price of crude has retraced substantially from the $50 per barrel level as the sector is oversupplied given the weak global economic conditions and Saudi Arabia’s above-average production, the long-term price of crude is still favorable given that Saudi Arabia cannot keep crude prices artificially low forever. OPEC member countries will meet in Vienna on December 4, and some investors are clearly speculating that crude prices will rebound enough for some beaten up E&P’s to do well. Bill Barrett Corp investors could certainly use a crude rally, as shares are down by almost 60% year-to-date. 20% of Bill Barrett Corporation (NYSE:BBG)’s float is short, so short covering could also be a reason for today’s rally.

MeetMe Inc (NASDAQ:MEET) isn’t exactly a social media goliath but its shares are up today from follow-on momentum. MeetMe shares gapped up on October 7 after the company issued positive preliminary third quarter 2015 financial results of $14.2 million in revenue (versus previous guidance of $12.5 million-to-$13 million) and $5.1 million in adjusted EBITDA (versus previous guidance of $2 million-to-$3 million). The company’s mobile engagement numbers are rising, and management is controlling costs. The analysts at Northland Securities have an ‘Outperform’ rating on the stock with a $3.50 price target, which implies greater than 50% upside potential. We would like to see consistent growth before considering however.

Disclosure: None