Pre-Market Primer: Why Investors Will be Watching Tesla, Merck, and Three Other Stocks Today

All three index futures are in the red in this morning’s pre-market as traders worry about a potential Brexit. While a Brexit wouldn’t be unexpected, it might cause a risk-off stance, especially given that the major indexes seem to be having trouble making new highs. Adding to the selling is the price action of crude futures, which are also in the red today for various reasons. In this article, we find out why five stocks, Tesla Motors Inc (NASDAQ:TSLA), Merck & Co., Inc. (NYSE:MRK), Continental Resources, Inc. (NYSE:CLR), Urban Outfitters, Inc. (NASDAQ:URBN), and H & R Block Inc (NYSE:HRB) are buzzing and see how elite funds are positioned in them.

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

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Tesla Responds to Rumors

Tesla Motors Inc (NASDAQ:TSLA) is slightly lower in pre-market trading after Bloomberg reported that the U.S. National Highway Traffic Safety Administration is examining a potential suspension issue with Tesla’s Model S. The article said that the agency is asking for additional information from Tesla and from Model S owners. Tesla promptly responded that the article might not be true. In a blog post, the company said that, “there is no safety defect with the suspensions in either the Model S or Model X,” and that the “NHTSA has not opened any investigation nor has it even started a “preliminary evaluation,” which is the lowest form of formal investigatory work that it does.” 39 funds in our database were long Tesla Motors Inc (NASDAQ:TSLA) at the end of March.

Merck Buys a Biotech

Merck & Co., Inc. (NYSE:MRK) is in the spotlight after the healthcare giant bought Afferent Pharmaceuticals, a biotech developing treatments for a chronic cough and neurogenic conditions. Merck will pay $500 million up front for  the acquisition, with the potential for payments up to an additional $750 million for various milestones. Of the 766 active funds that we track, 70 funds owned $2.49 billion in Merck & Co., Inc. (NYSE:MRK) holdings on March 31, which accounted for 1.70% of the float.

On the next page we examine why investors are watching Continental Resources, Urban Outfitters, and H & R Block today

DUC Wells Come Onto the Market

Continental Resources, Inc. (NYSE:CLR) CEO Harold Hamm confirmed what some industry analysts suspected, which is that the company has begun completing drilled but uncompleted wells. With WTI poking its head above $50 per barrel, Continental Resources has apparently decided that finishing the wells will produce an acceptable return for investors. The production from those wells could slow the decline in U.S shale production. Despite the new supply coming onto the market, Mr. Hamm is bullish, stating that his company won’t drill new wells until prices rise above $60 per barrel and that WTI could rise to $70 by the end of this year. The number of elite funds that we track with holdings in Continental Resources, Inc. (NYSE:CLR) rose by 16 quarter-over-quarter to 50 as of the end of March.

Urban Outfitters Lower on Sales Warning

Urban Outfitters, Inc. (NASDAQ:URBN) is considerably lower in the pre-market, by nearly 9%, after the retailer warned that its same-store sales might be lower than anticipated. The retailer specifically said that its comparable retail net sales for the current quarter have retreated by mid-single-digits. Analysts were instead expecting the comp sales to rise by 1.1%. Cliff Asness‘ AQR Capital Management was one of the top shareholders of Urban Outfitters, Inc. (NASDAQ:URBN) at the end of the first quarter.

H & R Block Beats Estimates

Tax preparer H & R Block Inc (NYSE:HRB) announced adjusted EPS from continuing operations of $1.59 on revenue of $3 billion for its fiscal year 2016 ended April 30, 2016. The company bought back 3.9 million shares during its fiscal fourth quarter and raised its dividend by 10%. The total amount of buybacks for the full fiscal year amounted to 56.4 million shares or 20.5% of the float. H & R Block Inc (NYSE:HRB) will focus on slowing its client decline for the next fiscal year. 20 top funds in our system held H & R Block shares as of the most recent 13F reporting period.

Disclosure: None