Here’s Why These Five Stocks Are In the Spotlight

All three major index futures are in the red today as the market remains concerned about a potential Brexit. Fears that a Brexit might cause other nations to consider leaving the EU has prompted bond yields around the world to decline to near records and for riskier equities to decline. Among the stocks in the spotlight in the risk-off backdrop are LyondellBasell Industries NV (NYSE:LYB), Electronic Arts Inc. (NASDAQ:EA), Dr.Reddy’s Laboratories Ltd (ADR) (NYSE:RDY), Allergan plc Ordinary Shares (NYSE:AGN), and Teva Pharmaceutical Industries Ltd (ADR) (NYSE:TEVA). Let’s dive in and see what hedge funds think of each stock.

Hedge fund sentiment is an important metric for assessing the long-term profitability. At Insider Monkey, we track over 700 hedge funds, whose quarterly 13F filings we analyze and determine their collective sentiment towards several thousand stocks. However, our research has shown that the best strategy is to follow hedge funds into their small-cap picks. This approach can allow monthly returns of nearly 95 basis points above the market, as we determined through extensive backtests covering the period between 1999 and 2012 (see the details here).

Bullish Write Up of LyondellBasell

LyondellBasell Industries NV (NYSE:LYB) is the beneficiary of the Barron’s bounce today in the pre-market. Shares of the chemical maker are up in pre-market after the financial magazine published an article entitled, ‘LyondellBasell Stock Offers a 4.2% Yield and Upside’. In the article, the writer, Jack Hough, says that it’s time for bargain hunters to hit the buy button on the stock given LyondellBasell’s retracement from $100 to $80 and its $4.2% yield. Hough thinks LyondellBasell shares could deliver a total return of around 20% as the stock’s P/E ratio rises in line with its peers due to cost-efficiency initiatives and potentially higher crude prices, which confers onto LyondellBasell an advantage versus its international peers. Of the around 766 elite funds we track, 54 funds owned $2.36 billion worth of LyondellBasell Industries NV (NYSE:LYB)’s stock, which accounted for 6.40% of the float on March 31, versus 55 funds and $3.17 billion on December 31.

Electronic Arts Eager To Nurture Competition

Electronic Arts Inc. (NASDAQ:EA) is in the spotlight on Monday after the company announced plans over the weekend to create four EA tournaments focused on the company’s Madden football game that will have corporate sponsors and will televised similar to sporting or poker events. The four tournaments will have $1 million in prizes and will mark a major expansion for Electronic Arts in the arena of competitive gaming or e-sports. Madden is perhaps the best game for Electronic Arts Inc. (NASDAQ:EA) to feature seeing as the video game franchise has sold more than 100 million copies since its introduction. Stephen Mandel’s Lone Pine Capital was a large shareholder of Electronic Arts at the end of March.

On the next page, we examine DrReddy’s Laboratories, Allergan and Teva Pharmaceutical Industries.

M&A in the Generics Business

According to Reuters, Dr.Reddy’s Laboratories Ltd (ADR) (NYSE:RDY) has agreed to purchase eight generic drugs from Allergan plc Ordinary Shares (NYSE:AGN) and Teva Pharmaceutical Industries Ltd (ADR) (NYSE:TEVA). The purchase will cost Dr Reddy $350 million in cash and will help improve the company’s growth in the United States. Teva is selling the generics to win approval from U.S. regulators for its acquisition of Allergan’s generic business, which, if completed, is expected to yield substantial synergies. Although Dr Reddy hasn’t released the exact names of the generic medicines, the company did say that the branded versions of the generics brought in U.S. revenue of around $3.5 billion for the most recent twelve months ending in April 2016. Of the 766 elite funds we track, the smart money found Allergan plc Ordinary Shares (NYSE:AGN) the most attractive with 170 funds owning shares at the end of March. Teva Pharmaceutical Industries Ltd (ADR) (NYSE:TEVA) was next with 70 funds long the stock, and Dr.Reddy’s Laboratories Ltd (ADR) (NYSE:RDY) was last with eight funds holding shares at the end of the first quarter.

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