What You Need To Know About These 4 Hot Stocks

Shares of Lendingtree Inc (NASDAQ:TREE), Grupo Financiero Galicia S.A. (ADR) (NASDAQ:GGAL), Pandora Media Inc (NYSE:P), and Horizon Pharma PLC (NASDAQ:HZNP) are all surging at the start of trading this week. Let’s take a closer look at the upside catalysts pushing these stocks higher and examine how the smart money views each stock.

In the eyes of most traders, hedge funds are assumed to be underperforming, old investment tools of the past. While there are more than 8,000 funds in operation at present, Insider Monkey looks at only the aristocrats of this group, around 730 funds. Contrary to popular belief, Insider Monkey’s research revealed that hedge funds underperformed in recent years because of their short positions as well as the huge fees that they charge, not because they are not good at picking stocks on the long side of their portfolios. Hedge funds did in fact manage to outperform the market on the long side of their portfolios. In fact, the 15 most popular small-cap stocks among hedge funds has returned 102% since the end of August 2012, beat the S&P 500 Index by 53 percentage points (see the details here).

Lendingtree Inc (NASDAQ:TREE) is up by 22.55% in afternoon trading after the company reported third quarter earnings of $0.59 per share on revenues of $69.8 million this morning, beating analysts’ profit estimates by $0.10 per share and exceeding revenue expectations by $8.78 million. Revenue from mortgage products rose by 38% year-over-year to $44.2 million while revenue from non-mortgage products increased by 175% year-over-year to $25.6 million. Guidance was also strong, with management expecting full year revenue of $244 million-to-$247 million and full year adjusted EBITDA to be $38.3 million-to-$38.8 million, up from the previous guidance of $225 million-to-$230 million and $35 million-to-$36 million, respectively. Our data gathered from around 730 elite funds shows that they were collectively bullish on Lendingtree Inc (NASDAQ:TREE) in the second quarter. A total of 18 funds reported stakes in the stock worth $106.8 million (accounting for 11.90% of the float) at the end of June, up from 14 funds with holdings valued at $96.47 million at the end of March. Josh Goldberg‘s G2 Investment Partners Management owned 358,732 shares at the end of June, good for 10.31% of its equity portfolio.

Grupo Financiero Galicia S.A. (ADR) (NASDAQ:GGAL) rallied 11.83% after Argentinian stocks surged in anticipation of an election runoff between Daniel Scioli of the Victory Front party, and Mauricio Macri of the Cambiemos coalition. Although Mr. Scioli was widely regarded as the front runner before Sunday’s vote, he managed to pull in just 0.4% more votes than Macri with 84% of the balloting stations having reported in. Based on the rally, investors feel Macri would be a more friendly President toward stocks and banks like Grupo Financiero Galicia S.A. (ADR) (NASDAQ:GGAL). Macri may need the support of Sergio Massa of the Peronist party, however, to win. Hedge funds are ambivalent towards the stock. 14 funds owned $66.88 million of the company’s shares (representing 2.70% of its common stock) on June 30, versus 12 funds with $70.97 million worth of shares on March 31.

On the next page, we examine why Pandora and Horizon are surging.
Pandora Media Inc (NYSE:P) is up by 7.34% after analysts at Macquarie upgraded the internet radio company to ‘Outperform’ from ‘Neutral’ and assigned the stock a target price of $19 per share. Macquarie thinks revenue will continue growing as monetization improves and as the company launches new products such as One Day Pass. The analysts also think the market is being too pessimistic about the threat of competition from Apple and Spotify. Because of the 25% year-to-date drop in the stock, the analysts think ‘the bear/bull case [for Pandroa] is now too asymmetrical to ignore’. Our data shows the smart money was more cautious on Pandora in the second quarter. 30 funds reported stakes in the company worth $689.76 million (accounting for 21.00% of the float) at the end of June, down from 37 funds and $752.05 million respectively at the end of March.

Horizon Pharma PLC (NASDAQ:HZNP) has inched up by 3.11% in afternoon trading as sentiment around drug stocks improves. Valeant Pharmaceuticals Intl Inc ( NYSE:VRX) shares are beginning to stabilize after its management hosted a conference call addressing its relationships with various specialty pharmacies. Valeant management said they found ‘no evidence whatsoever’ of any illegal activity. Although Horizon Pharma has no ownership in pharmacies or options to buy stakes in pharmacies like Valeant does, the two stocks have been correlated due to their similar business models. Our data shows that the hedge funds we follow were bullish on Horizon Pharma PLC (NASDAQ:HZNP) in the second quarter. A total of 43 funds reported stakes worth $1.84 billion, amounting to 34.30% of the float at the end of June, up from 43 funds with $1.23 billion in shares at the end of March. James E. Flynn‘s Deerfield Management owned 12.26 million shares at the end of June.

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