There are a few stocks which traded significantly lower today, a couple of which just couldn’t seem to catch a break, although one of them has begun to rebound in afternoon trading. These major morning market losers are MBIA Inc. (NYSE:MBI), Peabody Energy Corporation (NYSE:BTU) and Vale SA (ADR) (NYSE:VAL). MBIA Inc. (NYSE:MBIA)’s stock had already dropped by around 26% on Monday and that trend continued this morning, with the stock having dropped another 9% at point this morning. However shares have since rallied heartily and are now actually up slightly for the day, by nearly 1%. MBIA is a company which has exposure to the Puerto Rican Islands, and due to this, was getting beat up in the US market following the news of financial crisis taking place in the US Commonwealth. Peabody Energy Corporation (NYSE:BTU) has experienced the opposite effect of sorts, having soared by more than 10% on Monday, but giving back nearly all of those gains today, with shares trading down by over 12%. The stock jumped yesterday due to the Supreme Court’s ruling that the Environmental Protection Agency (EPA) must consider the financial impact to companies before imposing regulations over public health. The gains by Peabody Energy have reversed today as analysts’ believe the ruling might not help the coal industry all that much. In the last year, Vale SA (ADR) (NYSE:VAL) has dropped more than 55%, and by more than 25% since May alone. That hasn’t stopped it from dropping another 4% so far today however, continuing the general trend among metal and mining sector stocks. So, were hedge funds expecting these developments and braced themselves accordingly? Let’s take a look at the data and find out.
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MBIA Inc. (NYSE:MBIA)’s stock had dipped by more than 30% so far this week mainly due to the hostile financial environment in the Puerto Rican Islands, as mentioned. Hedge fund were rather bearish on this stock entering the quarter, with the number of them having holdings in it decreasing to 29 at the end of the first quarter, from 37 at the end of the fourth quarter. There was also a drop of 22% in the aggregate capital invested, down to $237.96 million, while shares were only down slightly during that period, so there was clear bearish sentiment on the stock. Looking at the hedgies followed by Insider Monkey, Royce & Associates, managed by Chuck Royce, holds the largest position in MBIA Inc. (NYSE:MBI), with around 5.0 million shares worth $47.3 million and comprising 0.2% of its 13F portfolio. Intriguingly, Mark T. Gallogly‘s Centerbridge Partners said goodbye to the largest position of all the hedgies tracked by Insider Monkey, totaling an estimated $15.6 million in stock at the end of the first quarter. In terms of insider activity, CEO of MBIA, Joseph Brown purchased around 76,000 shares on June 19. Overall, the hedge funds were right to be bearish on this stock, though the large purchase by the company’s CEO is noteworthy.
Peabody Energy Corporation (NYSE:BTU) has lost more than 70% so far this year and over 85% in the past 12 months. The number of hedge funds holding long positions in the stock fell heavily during the first quarter, to 19 at the end of the first trimester, from 29 at the end of the fourth quarter. However, the overall capital invested by the hedge funds dropped just $13.9 million to $225.96 million, just a 5.8% drop while the stock lost more than 36% of its value during the first three months. This shows that the hedge funds were not completely bearish on the stock. Especially, Dmitry Balyasny‘s Balyasny Asset Management initiated the largest position in the stock by buying 27.31 million shares, valued at $134.34 million at the end of March. Hedge funds managed by top managers like Jim Simons and Ken Griffin have increased their position in the stock during the first three months of the year as well.
Vale SA (ADR) (NYSE:VAL)’s stock had a huge dip in the first quarter as well, as it lost around 30% of its value in the January – March period. While the stock had gained back the lost value by early May, it has slid right back down near its 52-week low since, having dropped around 30% since then and over 4% today. Heading into the second quarter, a total of 23 of the hedge funds tracked by Insider Monkey held long positions in this stock, a drop of 12% from the end of the fourth quarter. Hedge funds’ collective investment in the stock decreased by around 26% compared to a 30% drop in the value of the stock during the first trimester, indicating that hedge funds weren’t completely fleeing the stock, but that their positions eroded in value from the value of the stock itself. Notably, James Dinan‘s York Capital Management opened up the largest ‘Call’ position in the stock during the first quarter, worth around $23.6 million at the end of March. On the contrary, Michael Hintze‘s CQS Cayman LP said goodbye to the stock by selling the 2.3 million shares it once held, during the first three months of the year.
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