Here’s What You Should Know about These Stocks in Spotlight Today

On the last day of the trading week, shares of J C Penney Company Inc (NYSE:JCP), Nordstrom, Inc. (NYSE:JWN), Dillard’s, Inc. (NYSE:DDS), Honda Motor Co Ltd (ADR) (NYSE:HMC), and Allergan plc Ordinary Shares (NYSE:AGN) are on the move due to various reasons. Given that sharp movement can sometimes be an indicator of future trends, let’s uncover why traders are buying or selling each stock. Let’s also see how the smart money investors positioned themselves towards these companies.

We believe that imitating hedge funds and other large institutional investors can be helpful in identifying stocks capable of outperforming the broader market. Through extensive research that covered portfolios of several hundred large investors between 1999 and 2012, we determined that following the small-cap stocks that large money managers are collectively bullish on, can generate monthly returns nearly 1.0 percentage points above the market (see the details here).

J C Penney Falls on Weak Sales

The turnaround of J C Penney Company Inc (NYSE:JCP) will apparently take longer than expected as sales of the retailer continue to decline. In its first quarter, J C Penney lost $0.32 per share on revenue of $2.81 billion, versus estimates of a loss of $0.38 per share on sales of $2.92 billion. Sales declined 1.7% year-over-year as comp sales inched lower by 0.4% year-over-year. Guidance is more positive, but still below market expectations. J C Penney’s management forecasts full year comp sales to rise 3% to 4% year-over-year and adjusted EPS to be positive. Full year gross margin is expected to grow just 10 to 30 basis points. J C Penney Company Inc (NYSE:JCP) shares are off 3.4% so far in early morning trading. Jim Simons’ Renaissance Technologies owned almost 18 million shares of J C Penney at the end of December.

Nordstrom Plunges Due to Earnings Miss 

Nordstrom, Inc. (NYSE:JWN) is 14% in the red this morning after the retailer reported earnings of $0.26 per share on revenue of $3.25 billion, missing estimates by $0.20 per share and $30 million, respectively. Comparable sales declined 1.7% year-over-year as demand for luxury clothes was apparently soft. As for guidance, the weak demand picture doesn’t seem like it will improve this year, with management expecting full year comparable sales growth to be in the range of -1% to +1% versus their previous guidance of +3.5% to +5.5%. Management also cut their full year EPS guidance to $2.50-$2.70 from the previous $3.10-$3.35. Some hedge funds may have seen the bearish news coming. A total of 29 funds from our database reported stakes in Nordstrom, Inc. (NYSE:JWN) worth $208.55 million (representing 2.30% of the float) at the end of December, versus 38 funds a quarter earlier.

On the next page, we examine Dillard’s Inc, Honda Motor Co Ltd (ADR), and Allergan plc Ordinary Shares.

First-Quarter Miss At Dillard’s

Dillard’s, Inc. (NYSE:DDS)’s shares have retreated by more than 8% after the company reported first-quarter EPS of $2.17 on revenue of $1.54 billion. Those numbers missed the consensus by $0.35 per share and $20 million, respectively. Sales dropped 4.3% year-over-year as comparable store sales declined 5% from the same quarter last year. The disappointing sales pressured gross margin and net income to a point where the company’s EPS fell from $2.66 one year ago. Given the negative same store sales trend, shares of Dillard’s have slid by more than 14% year-to-date. Although the fundamentals are decidedly bearish, several hedge funds are betting on a turnaround. David Einhorn’s Greenlight Capital was among 17 funds tracked by Insider Monkey that held shares in Dillard’s, Inc. (NYSE:DDS) at the end of December.

Honda Reports a Surprise Loss

Honda Motor Co Ltd (ADR) (NYSE:HMC)’s stock is slightly in the red this morning after the vehicle manufacturer reported a surprise loss of around $860 million for its fiscal fourth quarter. The loss is principally due to increased costs due to the recalls of airbag inflators manufactured by Takata Corp. Honda has recalled millions of vehicles due to the defective airbag inflators and will recall millions more. Because the increased costs are a one-time event, shares of Honda Motor Co Ltd (ADR) (NYSE:HMC) are only down by 1.2%. Sales for the company rose 4.8% year-over-year for the quarter. A total of five funds that we track owned 0.1% of Honda’s float at the end of the fourth quarter.

Goldman Sachs Likes Allergan 

Allergan plc Ordinary Shares (NYSE:AGN) shares have gained over 2% after analysts at Goldman Sachs added the stock to their ‘Conviction Buy’ list. The analysts like Allergan plc Ordinary Shares (NYSE:AGN)’s strong balance sheet, rich pipeline, and $10 billion stock buyback authorization. The analysts think Allergan has more than 23% upside with a price target of $275 per share. Hedge funds are fans of Allergan too. Allergan was the most popular stock among the funds we track at the end of the last year.

Disclosure: none