Office Depot (ODP), Valeant (VRX) Among 5 of the Day’s Big Winners

It’s a red day for the markets, with all major U.S. indexes down, along with crude oil and gold. However, a few stocks are registering important gains in the early afternoon. Among them we can count Celator Pharmaceuticals Inc (NASDAQ:CPXX), Office Depot Inc (NASDAQ:ODP), Affymetrix, Inc. (NASDAQ:AFFX), Valeant Pharmaceuticals Intl Inc (NYSE:VRX), and Cerulean Pharma Inc (NASDAQ:CERU). Let’s take a look into the events driving these surges, and wee what the hedge funds in our database think about the companies involved.

Our research determined that following the small-cap stocks, that hedge funds are collectively bullish on, can help a smaller investor beat the S&P 500 by around 95 basis points per month (see more details here).

Let’s start with Celator Pharmaceuticals Inc (NASDAQ:CPXX), a small cap clinical-stage biopharmaceutical that is up by more than 17.75% in the early afternoon hours. The gains come just over a week after shares gained 432% on March 15, driven by promising results from a phase 3 trial for its cancer drug, Vyxeos. The stock has continued to rise since on management’s plans to file for regulatory approval of the drug later this year. Finally, what sent the stock even higher today was the announcement of an underwritten public offering of 4 million shares of common stock, at $9.50 per share. The company expects net proceeds to reach approximately $38 million, before fees. And, while it is true that the offer is dilutive for shareholders, it also provides the company with a more sound financial condition and it seems like investors are greatly valuing this.

Among the funds that we track, only three were long Celator Pharmaceuticals Inc (NASDAQ:CPXX) at the end of the fourth quarter of 2015. The largest stake was the one held by First Eagle Investment Management, comprising 612,600 shares worth more than $1 million.

Next up is Office Depot Inc (NASDAQ:ODP), which is trading up by almost 1.5% after a Wall Street Journal article assured that the government’s case against the company’s Staples, Inc. (NASDAQ:SPLS)’s acquisition “has an Achilles heel.” The government argues that tying up the last two national office-supply chains would destroy competition. However, back in 2013, it approved the merger of Office Depot and OfficeMax based on the companies providing data that showed that Amazon.com, Inc. (NASDAQ:AMZN) was still a viable competitor. Now, Office Depot and Staples are playing that card again and it will be hard for the government to argue around it. Encouraged by the article, the market sent Office Depot’s stock up on Wednesday.

Office Depot Inc (NASDAQ:ODP) had the support of 46 firms among those we track at the end of the fourth quarter. Their combined stakes accounted for more than 20% of the company’s total shares. Among them is Jeffrey Smith’s Starboard Value LP, which disclosed ownership of 4.48 million shares of the company as of December 31, and had greatly increased that stake by March 7, to 25.04 million shares.

Three of the day’s hottest stocks are covered on the next page.

Shares of Affymetrix, Inc. (NASDAQ:AFFX) are trading up by about 4.1% in the afternoon hours. The gains come after the company decided to delay the vote on its proposed merger with Thermo Fisher Scientific Inc. (NYSE:TMO), arguing that the unsolicited offer that Origin Technologies made for the company on Tuesday evening could lead to a “superior proposal” by Thermo Fisher. Origin Technologies, a new entity created by former Affymetrix executives, offered $17 per share in cash, trumping Thermo Fisher’s offer of roughly $14 per share.

A few funds in our database are benefiting from the bidding war. Among them we can count Samuel Isaly’s OrbiMed Advisors, which declared holding 7.51 million shares of Affymetrix, Inc. (NASDAQ:AFFX)  as of December 31. 17 funds in our database owned more than 20% of the company’s outstanding shares as of that date.

Another gainer on Wednesday afternoon is Valeant Pharmaceuticals Intl Inc (NYSE:VRX), which is trading up by more than 5.5%, a continuation of the 18.11% rally seen during the first two days of the week. While the reasons for Tuesday and Wednesday’s gains are not completely clear, evidence suggests that several pieces of news that emerged earlier this week continue to drive the surge. On Monday, the company announced that CEO Michael Pearson is stepping down, and that billionaire activist Bill Ackman has been appointed as a Director of the company’s Board. Mr. Ackman’s fund, Pershing Square, holds a 9% stake in Valeant which comprises about 30.71 million shares and has suffered notable losses due to the stock’s recent demise. In addition, management will issue a revised statement of the company’s financial results, seeking to correct the “improper conduct” of its former CFO (and interim CEO) Howard Schiller, who has denied any such wrongdoing.

On top of Pershing Square, another 82 funds in our database were long Valeant Pharmaceuticals Intl Inc (NYSE:VRX) at the end of the fourth quarter, with their combined stakes accounting for more than a third of the company’s total shares. Another major investor of the stock is Jeffrey Ubben’s ValueAct Capital, which held 14.99 million shares of the company on December 31.

Finally, there’s Cerulean Pharma Inc (NASDAQ:CERU), a micro cap clinical-stage oncology-focused company that is seeing its stock post gains of more than 13% this afternoon, after it released encouraging clinical data for its lead compound CRLX101 in gastric cancer. According to the press release, “CRLX101 Localizes Selectively in Human Tumors, Sparing Adjacent Healthy Tissue.”

Among the funds that we track, only five disclosed long stakes in Cerulean Pharma Inc (NASDAQ:CERU) as of the end of the fourth quarter. Their combined stakes, valued at less than $3 million, accounted for roughly 3.7% of the company’s outstanding stock. Kris Jenner, Gordon Bussard and Graham McPhail’s Rock Springs Capital Management held ownership of 625,000 shares of the company on December 31, valued at $1.75 million.

Disclosure: Javier Hasse holds no positions in any of the securities mentioned in this article.