These Five Stocks Are Trending on Earnings, Analyst Updates

With markets flat after the bell on Wednesday, investors are focused on individual stocks that are reporting their earnings for the previous quarter. Earnings reports usually have a more significant impact on an individual stock than more general news. In this article, we will cover five stocks that are trending in the first hours of trading on the back of earnings reports, as well as other news. In addition, we will look at the hedge fund sentiment towards these stocks in order to understand where you should go amid the hype.

At Insider Monkey we analyze the hedge fund sentiment of around 730 investors based on their quarterly 13F filings. This allows us to see in which stocks these investors prefer to put their faith and money and identify profitable opportunities. Hedge funds usually operate with a lot of capital and have to thoroughly research each one of their investments, while their focus on long-term gains allows us to emulate them. We have determined that imitating hedge funds’ 15 most popular small-cap picks can generate monthly returns of around one percentage point above the market. This approach helped us generate returns of 102% in the last three years, which is 53 percentage points higher than the gains delivered by the S&P 500 ETF (SPY) (see more details here).

Let’s start with  Lam Research Corporation (NASDAQ:LRCX), whose stock has advanced by nearly 6% so far today, after the company reported its financial results for the most recent quarter and announced an acquisition. The company posted adjusted EPS of $1.82, beating the estimates of $1.71. Its revenue advanced to $1.60 billion from $1.15 billion a year earlier. Moreover, the company announced that it expects adjusted net income per share of around $1.42 for the current quarter. In another statement, Lam Research Corporation (NASDAQ:LRCX) announced the acquisition of KLA-Tencor Corp (NASDAQ:KLAC) for $10.6 billion. The smart money is optimistic about Lam Research Corporation (NASDAQ:LRCX)’s potential, as 48 funds from our database reported stakes equal to 9.80% of the company as of the end of June. Among them, billionaires Ken Griffin of Citadel Investment Group and David Einhorn of Greenlight Capital held the largest stakes, containing 1.96 million shares and 1.64 million shares, respectively.

Next in line is EMC Corporation (NYSE:EMC), whose shares have slid by over 5% on Wednesday after it announced a 1% annual increase in revenues to $6.08 billion and adjusted earnings of $0.43 per share, down from $0.44 a year earlier. Moreover, the company’s EPS missed the consensus estimate by $0.01. EMC announced earlier that it was being taken over by Dell, in a deal worth $67 billion (see more details here). During the second quarter, the number of funds with long positions in EMC Corporation (NYSE:EMC) declined by seven to 54, while the aggregate value of their stakes was equal to 5% of the company’s outstanding stock. Paul Singer’s Elliott Management held 33.6 million shares of EMC Corporation (NYSE:EMC) at the end of June.

On the following page, we are going to discuss two tech stocks that are down on the back of analyst downgrades and one micro-cap biopharmaceutical stock.

Shares of Micron Technology, Inc. (NASDAQ:MU) have lost some 2% so far today on the back of an analyst downgrade. Needham & Company LLC downgraded the stock to ‘Hold’ from ‘Strong Buy’ and lowered its price target to $17.09 from $22.27. Nevertheless, most analysts still have ‘Buy’ ratings on Micron Technology, Inc. (NASDAQ:MU) and the consensus price target amounts to $24.32 per share. At the end of June, a total of 79 funds from our database held shares of Micron Technology, Inc. (NASDAQ:MU), down from 100 a quarter earlier, while the total value of their stakes was equal to 18.30% of the company’s outstanding stock. Among these funds, Einhorn’s Greenlight Capital held 37.95 million shares (see what Einhorn said about Micron).

Twitter Inc (NYSE:TWTR) is next in line after its stock slid by 6.5% after Morgan Stanley downgraded it to ‘Underweight’ from ‘Equal Weight’ and lowered its price target to $24 from $36. In the research note, the analysts at Morgan Stanley said that Twitter Inc (NYSE:TWTR) is being negatively affected by an increase in competition in the mobile space and is suffering from limited user growth, a lack of material, and declining engagement, among other things. Hedge funds seem to share the same opinion, as they are also underweight the stock. A total of 47 funds among those we follow held stakes in Twitter Inc (NYSE:TWTR) equal to 2.90% of its outstanding stock at the end of June.

Penny stock Synta Pharmaceuticals Corp. (NASDAQ:SNTA) dropped by over 70% after the company announced the termination of its Phase 3 GALAXY-2 trial of ganetespib and docetaxel in the second-line treatment of patients with advanced non-small cell lung adenocarcinoma. The company said that based on an interim analysis, the addition of ganetespib and docetaxel would not demonstrate a statistically significant improvement in the primary endpoint compared to docetaxel alone.

Disclosure: None