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.

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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.

Knowles Corp (NYSE:KN)‘s stock has slumped by nearly 20% after the company announced its financial results on Monday and provided a weak outlook for the fourth quarter. In the third quarter, Knowles Corp delivered revenue of $294.6 million, down from $300.8 million posted a year earlier, while non-GAAP EPS of $0.16 dropped from $0.38. The company also said it expects revenue between $290 million and $310 million for the fourth quarter, non-GAAP EPS in the range of $0.18-to-$0.24, and revenue of $313.63 million. During the second quarter, Knowles Corp lost some popularity among smart money investors, as 16 funds reported Knowles’ stakes, compared to 21 a quarter earlier. These funds held 9.30% of Knowles’ outstanding common stock. Meanwhile, Ken Fisher‘s Fisher Asset Management initiated a stake in Knowles Corp (NYSE:KN) during the third quarter, disclosing holding 122,669 shares in its latest 13F filing.

Xerox Corp (NYSE:XRX)‘s has extended its losses for a second straight day after tumbling by around 3% yesterday. The stock is currently over 6% in the red today as investors and analysts become more concerned over the company’s growth. Yesterday, Xerox reported its financial results for the third quarter, which included a GAAP loss of $0.04, compared to a profit of $0.22 a year earlier, and said that its board of directors will conduct “a comprehensive review of structural options” for its portfolio. Earlier today, Brean Capital and Barclays lowered their price targets on Xerox Corp (NYSE:XRX)’s stock to $12.00 and $9.00 respectively, along with ‘Buy’ and ‘Underweight’ ratings. Fitch Ratings has also placed the company’s ratings on ‘Rating Watch Negative’ on the back of the board’s decision to review the portfolio. The smart money investors from our database are also underweight Xerox Corp, as 30 of them reported stakes equal to less than 4% of the company’s outstanding stock as of the end of June. Fisher Asset Management owns 11,400 shares of Xerox as of the end of September.

Disclosure: None