Shares of Windstream Corporation (NASDAQ:WIN), Linn Energy LLC (NASDAQ:LINE) and eBay Inc (NASDAQ:EBAYV) have all lost significant value so far today. Windstream’s stock lost around 9% on Monday morning and then slightly recovered, currently trading 2.30% in red. The fall follows UBS downgrading the stock to a ‘Sell’ rating from their previous ‘Neutral’ rating. The analyst firm also set a $5 price target on the stock. Linn shares declined by as much as 8.42% in trading this morning to a low of $7.61. Meanwhile, eBay’s EBAYV shares, trading on an as-issued basis ahead of the firm’s official split from PayPal (trading under PYPLV under the same circumstances), slid as much as 6.65% to $25.83 per share, though they’ve since rebounded and are now down by just over 2%. By contrast, EBAY shares reached a high of $63.74 per share today, up by 2.20%.
The plunge of these shares’ prices today, however, does not necessarily coincide with how confident hedge funds felt about the stocks during the first quarter. Nonetheless, before delving deeper into Windstream Corporation (NASDAQ:WIN) and Linn Energy LLC (NASDAQ:LINE) losing support from the smart money and eBay Inc (NASDAQ:EBAYV) experiencing the opposite, let’s first discuss why exactly Insider Monkey is interested in hedge fund activities.
Most investors can’t outperform the stock market by individually picking stocks because stock returns aren’t evenly distributed. A randomly picked stock has only a 35% to 45% chance (depending on the investment horizon) to outperform the market. There are a few exceptions, one of which is when it comes to purchases made by corporate insiders. Academic research has shown that certain insider purchases historically outperformed the market by an average of seven percentage points per year. This effect is more pronounced in small-cap stocks. Another exception is the small-cap stock picks of hedge funds. Our research has shown that the 15 most popular small-cap stocks among hedge funds outperformed the market by nearly a percentage point per month between 1999 and 2012. We have been forward testing the performance of these stock picks since the end of August 2012 and they have returned more than 135% over the ensuing 34 months, outperforming the S&P 500 Index by nearly 80 percentage points (read the details here). The trick is focusing only on the best small-cap stock picks of funds, not their large-cap stock picks which are extensively covered by analysts and followed by almost everybody.
Considering this, we’re going to view the latest key hedge fund activity concerning Windstream Corporation, Linn Energy LLC and eBay Inc.
How have hedge funds been trading Windstream Corporation (NASDAQ:WIN), Linn Energy LLC (NASDAQ:LINE) and eBay Inc (NASDAQ:EBAYV)?
Today’s decline of Windstream stock mirrors the decline in interest the firm saw from hedge funds by the end of the first quarter when a total of 18 of the hedge funds tracked by Insider Monkey were long in Windstream, down by 25% from the close of the fourth quarter. This was reflected in the 23.89% quarterly decline in the total holdings of those funds with positions on March 31, to about $107 million. The stock was down by 10.19% in the first quarter. Joel Greenblatt’s Gotham Asset Management had the biggest position in Windstream Corporation (NASDAQ:WIN), worth close to $28.8 million and made up of 3.89 million shares, but even Gotham Asset Management’s stake was slashed by 43% quarter-over-quarter. Leading the selloff of Windstream stakes was Jim Simons’ Renaissance Technologies, which sold a position of 3.29 million shares worth close to $27.1 million.
There was also an exodus of hedge funds from Linn Energy as a total of four of the hedge funds tracked by Insider Monkey held long positions in the firm by the end of the first quarter, plunging 56% from the previous quarter. Holdings also sank during the first quarter by 63.41% to $7.18 million by the end of March. While there were no new stakes taken in Linn Energy LLC (NASDAQ:LINE) during the quarter, there were substantial sales of stakes by hedge funds. At the top of the heap, Renaissance Technologies cut the biggest investment, dumping 912,437 shares, valued at an estimated $9.24 million.
Unlike Windstream and Linn Energy, EBAY witnessed bullish sentiment from hedge funds in the first quarter. A total of 90 of the hedge funds tracked by Insider Monkey were bullish in this stock on March 31, an increase, although just slightly, of 3% from one quarter earlier. Holdings meanwhile went up by 5.30% to $11.86 billion. The stock went up by 2.78% in the first quarter. It should of course be noted that this bullishness included PayPal’s contribution to eBay, while the EBAYV shares are a headstart on eBay trading without PayPal in the fold. Icahn Capital LP, managed by Carl Icahn, holds the biggest position in eBay Inc (NASDAQ:EBAY), of 46.27 million shares totaling about $2.67 billion. Emerging Sovereign Group, managed by J Kevin Kenny Jr, initiated the largest position in eBay Inc in the first quarter holding a $248.4 million position by the end of it after buying 4.31 million shares.
Disclosure: None
