What Hedge Funds Have to Say about These 3 Trending Stocks?

With markets expected to extend their rally into the current week a number of stocks are already shaping their trajectory for the upcoming days. However, often the news has a short-term impact on a stock and smaller investors tend to overlook this while buying or selling shares. On the other hand, smart money investors usually focus on the long-term prospects of a company and following their sentiment can help to see where the stock is most likely to head, thus it helps to avoid buying a growing stock that is already overvalued or selling shares of a depreciating stock on fear that it will fall further, while it has a high chance of rebounding.

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At Insider Monkey we do just that. By following the 13F filings of over 700 elite hedge funds, we are analyzing their sentiment towards several thousand publicly-traded companies and see where these investors like to put their money. However, we mostly focus on their small-cap ideas, because they are the focus of our strategy, as we determined that 15 most popular stock picks among them can beat the market by double digits every year. Since our strategy went live in August 2012, these 15 most popular small-cap picks returned 102%, beating the S&P 500 ETF (SPY) by around 53 percentage points (see more details here).

With this in mind, let’s take a look at three stocks that are in the spotlight on Monday morning. We will start with Twitter Inc (NYSE:TWTR), whose stock slumped by over 4% after re/code reported that the company is planning layoffs across almost all departments. Even though a Twitter spokesperson told re/code that they are not commenting on speculations, multiple sources from inside the company said that the layoffs will be announced next week and will impact especially engineers, which currently represent about half of the 4,100 employees the company has. The company has recently appointed Jack Dorsey, a cofounder of the company, as the new CEO and apparently he is not wasting time on the job. Earlier this year, Twitter Inc (NYSE:TWTR)’s stock slumped as the company reported weak financial results, so the restructuring might help it boost its efficiency and will please the investors who have lost their confidence in the stock. Among the hedge funds that we track, Twitter has been downgraded as the number of investors with long positions in the company slipped to 47 from 64 between April and June, while the aggregate value of their holdings slid to $701.39 million from $1.75 billion and represented only 2.90% of the company at the end of the second quarter. Among these funds, the top shareholder of Twitter Inc (NYSE:TWTR) is Daniel Benton‘s Andor Capital Management, which slashed its stake by 63% to 1.50 million shares.

Then there is Ford Motor Company (NYSE:F), which has inched down only slightly, although the news that set the spotlight on Ford suggest more upside potential for the stock. Earlier today, Ford has said that it will invest around $1.8 billion during the next five years to further develop its research & development in China, where the company already has established itself as the fifth-largest foreign automaker. Ford Motor Company (NYSE:F) will develop more cars, especially hybrid and fully-electric models in order to get an even larger part of the largest auto market in the world by 2020. The news will please the investors, although hedge funds have been cautious towards the company so far. For example, among the funds that we track, only 36 investors reported stakes that amassed around 1.30% of the company at the end of June (by comparison, for General Motors these figures stand at 104 and 10.90% respectively). Nevertheless, between April and June, the number of funds with long positions went up by three, but the total value of their holdings declined to $754.96 million from $832.07 million. Richard S. Pzena’s Pzena Investment Management and Phill Gross and Robert Atchinson’s Adage Capital Management reported the largest stakes in Ford Motor Company (NYSE:F) among the funds from our database, with stakes of 17.72 million shares and 4.76 million shares respectively.

The third stock that we would like to take a look at is Anheuser Busch Inbev SA (ADR) (NYSE:BUD), which is also flat as the company is said to increase its bid for the UK brewer SABMiller to around 43-44 GBP. The British company last week rejected the latest offer, which valued it at roughly $104 billion (see details). So far, hedge funds are underweight Anheuser Busch Inbev SA (ADR) (NYSE:BUD) as 41 funds from our database reported stakes worth $4.34 billion as of the end of June, up from 48 funds with positions worth $4.0 billion a quarter earlier. Still, these funds held only 2.20% of the company at the end of the second quarter. Eric W. Mandelblatt‘s Soroban Capital Partners is the largest shareholder of Anheuser Busch Inbev SA (ADR) (NYSE:BUD) among the funds we track, with a position that contains 7.45 million shares as of the end of June.

Disclosure: none