General Electric Company (NYSE:GE), Biohaven Pharmaceutical Holding Company Ltd. (NYSE:BHVN), GrubHub Inc (NYSE:GRUB), Microsoft Corporation (NASDAQ:MSFT), and Tesla Inc. (NASDAQ:TSLA) are each trending for different reasons. Some, like Biohaven, are up big, while others like Tesla, are down slightly. Let’s find out why the spotlight is shining on each stock and how the smart money, or the around 740 elite funds we track, are positioned among them.
Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. 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.
General Electric Company (NYSE:GE) is trending after it agreed to pay $1.5 billion to the Department of Justice to settle subprime mortgage accounting violation accusations. Although the amount is generally in line with analyst estimates (GE set aside $1.5 billion in terms of reserves last year and the company announced the settlement in principle in January), shares of GE still fell around 1.3% as some investors didn’t like how GE’s financial resources will decrease due to the deal. General Electric shares are down around 26% over the last four quarters. Of the around 700-740 elite funds we track, 59 funds owned $2.96 billion of General Electric Company (NYSE:GE) on December 31, versus 46 funds and $4.54 billion respectively on September 30.
Biohaven Pharmaceutical Holding Company Ltd. (NYSE:BHVN) shares soared almost 20% after Bloomberg reported that the company is reportedly working with a financial advisor in preliminary stages to explore options including a potential sale after drawing potential interest from suitors. Nothing is certain and the talks might not culminate in any deal.
GrubHub Inc (NYSE:GRUB) shares are 5% in the red after analysts at Wedbush cut their price target due to new information from Uber’s S-1 filing, which showed that Uber Eats’ financials show that its ‘the largest meal delivery platform in the world outside of China based on Gross Bookings’. Analyst Ygal Arounian has a $100 price target down from $130 but has a ‘Outperform’ rating. 23 elite funds had a bullish position in GrubHub Inc (NYSE:GRUB) at the end of December.
Microsoft Corporation (NASDAQ:MSFT) is in the spotlight after news broke that Microsoft and Amazon are still in the race for a $10 billion cloud contract from the Pentagon. Although Amazon is regarded as the leader in the cloud, Microsoft has in many ways caught up, and a win for Microsoft could give it the lead in some areas and help investors view Microsoft more as a cloud company rather than as a Windows and Office company. The contract for the joint enterprise defense infrastructure deal was first announced by the government in 2017 and will be one of the biggest federal IT contracts ever. The winner could be announced as early as mid-July according to some analysts. 174 elite funds were long Microsoft Corporation (NASDAQ:MSFT) as of the most recent 13-F reporting period, up 4 funds from the previous quarter.
Tesla Inc. (NASDAQ:TSLA) is trending after David Einhorn of Greenlight Capital said in an investor letter than ‘The wheels are falling off — literally’. Einhorn is rather bearish on the auto maker, saying that Tesla showed ‘desperate price-cutting’, ‘rushed product announcements’ and that Musk ‘never admits the crisis in real time’. Given how bears have been rather vocal about Tesla for a long time, Tesla shares are relatively unchanged on the news. 47 top funds owned shares of Tesla Inc. (NASDAQ:TSLA) as of the most recent 13-F reporting period.
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