What Factors Have These 4 Stocks in Dire Straits Today?

With the market trying to stay above sea-level in afternoon trading on Monday, Chiasma Inc (NASDAQ:CHMA), Pacific Biosciences of California (NASDAQ:PACB), Fitbit Inc (NYSE:FIT), and Puma Biotechnology Inc (NYSE:PBYI) are all deep underwater. Let’s find out why investors are in a pessimistic mood when it comes to these four stocks. Given that Insider Monkey has done a lot of research into what the smart money likes and doesn’t like, we’ll also analyze relevant hedge fund sentiment towards them.

Why do we pay attention to hedge fund sentiment? Most investors ignore hedge funds’ moves because as a group their average net returns trailed the market since 2008 by a large margin. Unfortunately, most investors don’t realize that hedge funds are hedged and they also charge an arm and a leg, so they are likely to underperform the market in a bull market. We ignore their short positions and by imitating hedge funds’ stock picks independently, we don’t have to pay them a dime. Our research have shown that hedge funds’ long stock picks generate strong risk adjusted returns. For instance the 15 most popular small-cap stocks outperformed the S&P 500 Index by an average of 95 basis points per month in our back-tests spanning the 1999-2012 period (see the details here).

It’s a Monday to forget for shareholders of Chiasma Inc (NASDAQ:CHMA), as the value of the stock has fallen by 18% so far today. Although there is no apparent news-events causing the sell-off, weakness in the broader biotech sector is the likely culprit. The iShares Nasdaq Biotechnology (IBB) is down 3% so far on the back of valuation and growth concerns.

Chiasma is a late-stage biopharmaceutical company whose lead product candidate, Mycapssa, is a new formulation of octreotide designed to treat acromegaly, a medical condition that results from the body’s production of excess growth hormone. The company hopes to obtain FDA approval for the drug in 2016 and to begin commercializing it shortly thereafter. Mycapssa has a PDUFA date of April 15, 2016. Of the 730 elite funds that we track, four funds owned 4.80% of Chiasma Inc (NASDAQ:CHMA) shares as of September 30.

Today’s biotech sell-off is also hurting Pacific Biosciences of California (NASDAQ:PACB), as its stock is also in the red. Despite the company releasing data showing that it received orders for 49 Sequel Systems in the fourth quarter of 2015, Pacific Biosciences of California (NASDAQ:PACB) shares are almost 15% lower than Friday’s close. Because of Sequel’s potential, some analysts think the company could be a potential takeover target. If management doesn’t sell, however, shareholders might be in for a round of dilution, as Pacific Biosciences of California will likely need to raise money to keep its operations steady.

On the next page, we examine why shares of Fitbit Inc and Puma Biotechnology Inc. are floundering.
Fitbit Inc (NYSE:FIT) shares traded below their $20 per share IPO offering price for the first time ever today, as its stock is over 10% lower. Investors worry that the wearable tech company won’t be able to innovate fast enough to keep its growth and margins at levels that can deliver shareholder value. Shares of the company have been in a funk ever since it introduced a new smartwatch earlier in the year that failed to convince investors that Fitbit Inc (NYSE:FIT) can outlast Apple Inc. (NASDAQ:AAPL) at its own game. 20 elite funds held shares of the company at the end of the third quarter, down by seven from the quarter prior to that.

Puma Biotechnology Inc (NYSE:PBYI) isn’t immune to today’s biotech sell-off either, as its shares are down by 8.4% in afternoon trading. Puma Biotechnology Inc (NYSE:PBYI)’s lead candidate is PB272 (oral neratinib), a potent irreversible tyrosine kinase inhibitor. The company was scheduled to present at the 34th Annual J.P. Morgan Healthcare Conference today. Among the 18 elite funds in our database that held 31.3% of Puma’s float at the end of September is Jim Simons’ Renaissance Technologies, with a holding of 162,600 shares.

Disclosure: None