What Is Driving These Stocks’ Gains Today?

With all three major indexes trading in the green, shares of Ford Motor Company (NYSE:F), Alphabet Inc (NASDAQ:GOOGL), pSivida Corp. (NASDAQ:PSDV), ArcelorMittal SA (ADR) (NYSE:MT) and Dominion Diamond Corp (NYSE:DDC) are also gaining ground today. In this article, let’s take a look at why these stocks are trading higher. We are also going to assess the hedge fund sentiment towards these stocks.

We pay attention to hedge funds’ moves because our research has shown that hedge funds are extremely talented at picking stocks on the long side of their portfolios. It is true that hedge fund investors have been underperforming the market in recent years. However, this was mainly because hedge funds’ short stock picks lost a ton of money during the bull market that started in March 2009. Hedge fund investors also paid an arm and a leg for the services that they received. We have been tracking the performance of hedge funds’ 15 most popular small-cap stock picks in real time since the end of August 2012. These stocks have returned 102% since then and outperformed the S&P 500 Index by around 53 percentage points (see more details here). That’s why we believe it is important to pay attention to the hedge fund sentiment; we also don’t like paying huge fees.

The first on the list is Ford Motor Company (NYSE:F), whose shares are up by more than 2% today amid an Automotive News report that the automaker and Alphabet Inc (NASDAQ:GOOGL) are talking about the possibility of forming a joint venture with the objective of launching to the market self- driving cars using Google’s technology. Although the deal is not officially confirmed, under the terms of the future agreement, the joint venture could create a new company legally distinct from Ford. According to sources familiar with the matter, a deal might be announced at the annual International Consumer Electronics Show in Las Vegas in the first days of January. Alphabet Inc (NASDAQ:GOOGL)’s stock also opened higher amid the speculations.

Hedge funds have been more optimistic about Ford Motor Company (NYSE:F) recently, with 38 hedge funds long  at the end of the third quarter, up from 36 funds a quarter earlier. Together they hold some 1.7% of the company’s common stock, while Richard S. Pzena‘s Pzena Investment Management is the largest shareholder of Ford, owning 18.34 million shares valued at $248.9 million as of the end of September.

Moving on, pSivida Corp. (NASDAQ:PSDV)’s shares have appreciated by 30% after the company announces promising results of its first Phase 3 clinical trial evaluating certain characteristics (such as safety and efficacy) of its product Medidur™, which aims to treat chronic non-infectious uveitis affecting the posterior part of the eye. If results are favorable in a second phase 3 study to be carried out later, the company will seek approval (in this case it would be to FDA) of the new drug in 2017.

Among the funds we track, pSivida Corp. (NASDAQ:PSDV) gained some popularity during the third quarter, with a total of eight funds reporting long positions in the company, versus seven funds a quarter earlier. However, these funds amassed 12.5% of the company’s outstanding stock heading into the fourth quarter. Thomas Ellis and Todd Hammer‘s North Run Capital reported owning 2.14 million shares of pSivida Corp., valued at $7.8 million in its latest 13F filing.

ArcelorMittal SA (ADR) (NYSE:MT) shares have also advanced by some 6% today. This bullish move is trying to offset the disastrous performance during 2015, which sent the stock 63% in the red year-to-date.

Among the funds we follow, 18 reported long positions in ArcelorMittal as of the end of September, down by four funds from a quarter earlier. David Costen Haley‘s HBK Investments is the largest shareholder of the company among the investors we follow, owning 6.55 million shares valued at $54.2 million; the fund upped its stake by 31% during the third quarter.

Last but not least is Dominion Diamond Corp (NYSE:DDC), whose shares have surged by more than 20% today after the announcement that the Canadian mining company has hired financial advisers to analyze a possible sale due to shareholder pressure. The company has been criticized by a group of shareholders, including Toronto-based hedge fund K2 & Associates Investment Management, which sent a letter criticizing the strategy and business management of the company.

Hedge funds have been more pessimistic about the stock recently, with 18 hedge funds long Dominion Diamond Corp (NYSE:DDC) at the end of the third quarter, down from the 22 funds at the end of June.

Disclosure: none