Some stocks have been rallying particularly well today amid a general rally for the U.S market and we’ll take a look at what stands behind these surges as well as what hedge funds think of them in this article. The stocks under discussion in the following article are ITT Educational Services Inc. (NYSE:ESI), Atmel Corporation (NASDAQ:ATML), and Encana Corporation (NYSE:ECA).
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At Insider Monkey, we track hedge funds’ moves in order to identify actionable patterns and profit from them. Our research has shown that hedge funds’ large-cap stock picks historically underperformed the S&P 500 Total Return Index by an average of seven basis points per month between 1999 and 2012. On the other hand, the 15 most popular small-cap stocks among hedge funds outperformed the S&P 500 Index by an average of 95 basis points per month (read the details here). Since the official launch of our small-cap strategy in August 2012, it has performed just as predicted, returning 118% and beating the market by more than 60 percentage points. We believe the data is clear: investors will be better off by focusing on small-cap stocks utilizing hedge fund expertise (while avoiding their high fees at the same time) rather than large-cap stocks.
Moving on to our first candidate, ITT Educational Services Inc. (NYSE:ESI) has seen its stock skyrocket by 27% so far today. ITT Educational Services, which provides postsecondary degree programs in the United States, has been successful in putting an end to the unlawful suspension imposed by the California State Approving Agency for Veterans Education (CSAAVE) on its approval of ITT Tech for enrollment by veteran students. On August 21, State Court Judge William D. Claster issued a tentative final ruling in ITT Tech’s favor that the suspension by CSAAVE was unlawful. At the same time, CSAAVE abandoned its attempt to suspend ITT Tech a few hours later, which will allow the for-profit technical institute to continue serving the educational needs of veterans. Phil Frohlich’s Prescott Group Capital Management initiated a 622,335 share-stake in ITT Educational Services during the second quarter, which makes it one of the largest equity holders in the company.
Atmel Corporation (NASDAQ:ATML) has announced that its Chief Executive Officer, Steven Laub, agreed to a request from the company’s Board of Directors to extend his retirement date in order to accelerate the completion of an ongoing strategic evaluation process. Therefore it’s quite clear that the shares of the microcontroller maker are gaining ground due to a potential acquisition. The stock is up by 15.40% thus far in today’s trading session, but is still down by more than 9% year-to-date. Earlier this year, Atmel announced that CEO Laub had decided to retire as an officer and director, effective August 31, which could have hindered the company’s ongoing evaluation process. However, the recent news assures the market that Atmel is set to finalize a potential deal soon enough. Soros Fund Management, founded and overseen by billionaire George Soros, boosted its stake in Atmel Corporation (NASDAQ:ATML) during the latest quarter to 5.17 million shares.
Last but not least, Encana Corporation (NYSE:ECA), a Calgary-based oil and gas company, is 7.70% in the green today. Today, Encana Corporation announced that it had reached an agreement to sell its Haynesville natural gas assets in northern Louisiana for $850 million to GEP Haynesville, which is a joint venture between GeoSouthern Haynesville LP and funds managed by GSO Capital Partners LP. Reportedly, the company is set to use the capital raised from the deal to reduce its net debt so as to strengthen its balance sheet. The recent slump in oil prices have put heavy downward pressure on oil companies, and many of them have reduced capital spending plans and made other moves in order to improve their weak balance sheets. Under the terms of the recently-announced deal, Encana will also transport and market the acquirer’s production on a fee-for-service basis for the next five years. Israel Englander’s Millennium Management and Steven Cohen’s Point72 Asset Management significantly uplifted their stakes in Encana Corporation (NYSE:ECA) in the second quarter, amassing positions of 14.44 million shares and 6.70 million shares, respectively.
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