Why Amazon, Pandora, Bank of America, and 2 More Are Trending

The markets are rather calm today after Friday’s big sell-off. All three major indexes are modestly higher while crude futures are also up by 1% in afternoon trading.

In this article, we’ll find out why five companies are each in the spotlight today and use the latest 13F data to see how top hedge funds traded the five stocks in the second quarter. Those stocks are Amazon.com, Inc. (NASDAQ:AMZN), Pandora Media Inc (NYSE:P), HP Inc (NYSE:HPQ), Bank of America Corp (NYSE:BAC), and Farmland Partners Inc (NYSE:FPI).

Our backtests that covered the period between 1999 and 2012, showed that following the 15 most popular small-caps among hedge funds can help a retail investor beat the market by an average of 95 basis points per month (see the details here).

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Amazon.com, Inc. (NASDAQ:AMZN) and Pandora Media Inc (NYSE:P) are in the spotlight after the New York Times published an article stating that the two companies might change the prevailing paradigm in the music industry. Due to existing conventions, music streaming services are either free with ads or cost around $10 a month. With Amazon and Pandora’s new products set to be introduced over the next few weeks, however, that pricing structure could change. Both companies could introduce services that cost as low as $5 per month, which would undoubtedly help Pandora and Amazon win new customers. Pandora’s new service will reportedly allow customers to skip more songs and to store more preferred music online as well. Meanwhile, Amazon’s new service will reportedly offer access to the company’s full music catalog for Echo customers at $5 per month. Although they are shaking up the pricing for the industry, the New York Times article also said that the two companies may also have traditional fuller service plans that charge $10 per month.

In terms of hedge fund activity, Andreas Halvorsen‘s Viking Global owned over 3.2 million shares of Amazon.com, Inc. (NASDAQ:AMZN) at the end of the second quarter. Meanwhile, 46 owned shares of Pandora Media Inc (NYSE:P) at the end of June, up by 11 from the end of March.

Traders are talking about HP Inc (NYSE:HPQ) today after the company agreed to buy Samsung’s printer business for $1.05 billion. By buying the business, HP eliminates a competitor and consolidates the industry, which has been in somewhat of a slow decline recently. According to the IDC, the total number of printers shipped in the first quarter of 2016 slid by 10.6% year-over-year. Hopefully with the consolidation, HP will be able to improve its margins and unlock synergies. 40 funds that we track had a long position in HP Inc (NYSE:HPQ) at the end of the second quarter. Shares of the company are 2% higher in afternoon trading.

On the next page, we’ll examine why Bank of America and Farmland Partners are in the spotlight this afternoon.

Bank of America Corp (NYSE:BAC) is 0.76% in the green after another Fed official, Atlanta Fed President Dennis Lockhart, said that he would “encourage serious discussion of a policy rate increase.” Lockhart qualified his statement however, saying that he was not speaking on behalf of the FOMC or Federal Reserve. On Friday, Boston Fed President Eric Rosengren also said that he supported raising rates sooner rather than later. Bank of America will doubtlessly benefit from rising rates by realizing greater profits. The number of funds in our database with holdings in Bank of America Corp (NYSE:BAC) fell by eight quarter-over-quarter to 102 at the end of June.

Last but not least, Farmland Partners Inc (NYSE:FPI) is around 5% in the red today after the company agreed to merge with American Farmland Co (NYSEMKT:AFCO). According to FPI’s management, the merger is expected to be accretive to Farmland Partner’s AFFO per share by 10% in 2017 and by 20% when synergies are fully realized. Despite the long-term accretion, shares of Farmland Partners are in the red today because the transaction value represents a meaningful premium to American Farmland’s unaffected stock price. According to the terms, each share of American Farmland will receive 0.7417 shares of newly-issued Farmland Partners stock. Three funds owned $6.16 million worth of Farmland Partners Inc (NYSE:FPI) shares on June 30, which accounted for 4.50% of the float. Three were also long American Farmland Co (NYSEMKT:AFCO) at the end of June, shares of which have gained 19.21% today.

Disclosure: None