PPG Industries, Booz Allen Hamilton, and More: What is Going On With These Falling Stocks?

Although it has been downgraded to a ‘Category 3’ storm, hurricane Matthew is still as dangerous as ever as it makes its way to Jacksonville, Florida. Not surprisingly, many traders have chosen to stay on the sidelines today, as all three major indexes are around half a percentage point lower.

In this article, we will take a look at the reasons why five stocks, PPG Industries, Inc. (NYSE:PPG), Booz Allen Hamilton Holding Corporation (NYSE:BAH), First Solar, Inc. (NASDAQ:FSLR), SunPower Corporation (NASDAQ:SPWR), and 8Point3 Energy Partners LP (NASDAQ:CAFD), have fallen substantially further than the broader indexes on Friday. We will also see how the investors tracked by us were positioned towards each stock at the end of the second quarter.

Hedge fund sentiment is an important metric for assessing the long-term profitability. At Insider Monkey, we track over 740 hedge funds and other investors, 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).

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PPG Industries, Inc. (NYSE:PPG) is off by 9% after the company provided a disappointing update on its third-quarter financial outlook. For the period, PPG expects to report adjusted earnings from continuing operations between $1.54 and $1.57 per share and net sales of around $3.8 billion. Given today’s sell-off, those numbers were below the market’s estimate for the corresponding period. Although the company’s board of directors approved a $2 billion share repurchase program, the management’s comment of there being a ‘sluggish economic environment with no clear near-term catalyst for improving global GDP growth’ likely sent many traders heading for the exits. Of the around 749 funds that we track, 37 were long PPG Industries, Inc. (NYSE:PPG) at the end of the second quarter, down by two from the previous quarter.

Although the company’s former employee who was accused of taking classified information might have been ‘a hoarder’ rather than a leaker, Booz Allen Hamilton Holding Corporation (NYSE:BAH) shares are nevertheless down by another 3% after the New York Times published an article, saying that the former employee’s arrest will cause the government to scrutinize Booz Allen Hamilton and its roles for various intelligence agencies further. Unwanted attention, no matter how benign, is never a good thing in some traders’ eyes. Jim Simons’ Renaissance Technologies established a new stake of over 644,000 shares in Booz Allen Hamilton Holding Corporation (NYSE:BAH) during the second quarter.

On the next page, we examine why traders are selling First Solar, SunPower Corporation, and 8Point3 Energy Partners LP.
8Point3 Energy Partners LP (NASDAQ:CAFD), SunPower Corporation (NASDAQ:SPWR), and First Solar, Inc. (NASDAQ:FSLR) are each down around 5% to 6% after Marketwatch posted an article concerning SunPower and First Solar’s joint yieldco, 8Point3 Energy. According to the report, 8Point3 Energy is the first company to receive a letter from a newly established SEC task force for allegedly infringing revised guidelines on how to use certain non-GAAP metrics. The SEC task force, in particular, wondered why the yieldco left out certain non-recurring items from its adjusted EBITDA. The yieldco raised over $102 million in a secondary in September that used some of the non-GAAP financial metrics. Given the price action of other solar stocks, it is unclear at this moment whether traders are concerned about the Marketwatch article or not.

Among the funds that Insider Monkey tracks, 30 were long First Solar, Inc. (NASDAQ:FSLR), 19 funds held shares of SunPower Corporation (NASDAQ:SPWR), and just eight investors reported stakes in 8Point3 Energy Partners LP (NASDAQ:CAFD) as of the end of June.

Disclosure: none