What Sent These Four Stocks Deep in Red Territory on Tuesday?

With the markets inching down on Tuesday, a number of stocks are standing above the crowd, as they have lost significant ground on the back of important announcements. We have identified four of the top losers, which include Roadrunner Transportation Systems Inc (NYSE:RRTS), Endologix, Inc. (NASDAQ:ELGX), Knowles Corp (NYSE:KN), and Xerox Corp (NYSE:XRX). In this article we are going to take a closer look at the developments behind their downward trends and see if the hedge fund sentiment suggests that the market is overreacting and the stocks can be bought cheaper for long-term profits.

AshDesign/Shutterstock.com

Generally, our main focus is hedge fund activity, since we track over 700 of the best performing hedge funds and by identifying some of the most popular picks among them, we can spot stocks that can provide strong returns. For example, the 15 most popular small-cap ideas among the funds we track, around which our strategy is concentrated, have collectively returned 102% since August 2012, beating the S&P 500 ETF by some 53 percentage points (see more details here).

In Tuesday intraday trading, Roadrunner Transportation Systems Inc (NYSE:RRTS) has lost 47% so far, on the back of weaker guidance for the third quarter, which includes EPS between $0.14 and $0.17, compared to previous forecasts of between $0.43 and $0.47. The company was downgraded by two analysts, BB&T Corp. and Raymond James, to ‘Hold’ and ‘Market Perform’ respectively, as the company’s new EPS guidance is significantly below the $0.41 that the Street was expecting. Roadrunner Transportation Systems Inc (NYSE:RRTS) is also a stock that has been overlooked by most smart money investors, since only seven reported long stakes in it as of the end of June.

Shares of Endologix, Inc. (NASDAQ:ELGX) have slid by over 35% as the company agreed to acquire Trivascular Technologies Inc (NASDAQ:TRIV) in a cash and stock transaction announced on Monday that values Trivascular at $9.10 per share (see more details). At the end of June, a total of 17 funds from our database held long stakes in Endologix, Inc. (NASDAQ:ELGX), which represented around 17% of the company’s stock.