Why American Airlines, Royal Bank of Scotland, and More Are Trending Today

It’s been an up-and-down day on Wall Street; after opening in the red, the three major indexes are close to flat, with the Nasdaq in the green and the S&P 500 down only marginally. In this article, we’ll take a closer look at five trending stocks: American Airlines Group Inc (NASDAQ:AAL), United Continental Holdings Inc (NYSE:UAL), Royal Bank of Scotland Group PLC (NYSE:RBS), Versar Inc. (NYSEMKT:VSR), and Telecom Italia SpA (ADR) (NYSE:TI), and see why these stocks are in the news today and how the elite funds that we monitor are positioned in them.

At Insider Monkey, we track around 765 hedge funds and institutional investors. Through extensive backtests, we have determined that imitating some of the stocks that these investors are collectively bullish on, can help retail investors generate double digits of alpha per year. The key is to focus on the small-cap picks of these funds, which are usually less followed by the broader market and allow for larger price inefficiencies (see the details here).

Two Airlines Downgraded 

Analysts at Credit Suisse downgraded American Airlines Group Inc (NASDAQ:AAL) and United Continental Holdings Inc (NYSE:UAL) today and not surprisingly, both stocks are down, by around 4.5%, in an otherwise flat day for the market. Analyst Julie Yates downgraded American Airlines to ‘Underperform’ from ‘Outperform’, citing the company’s abysmal cash flow and soft PRASM metrics. Credit Suisse also downgraded United Continental to ‘Neutral’ from ‘Outperform’ due to lower earnings expectations. Not helping matters is the concern over a potential European recession due to the Brexit, which might impact European travel. According to Insider Monkey’s database of 766 active funds, 61 owned shares of American Airlines Group Inc (NASDAQ:AAL) as of the most recent 13F reporting period, while the number of funds with holdings in United Continental Holdings Inc (NYSE:UAL) fell by 12 quarter-over-quarter to 61 as of the end of March.

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Royal Bank of Scotland Continues Brexit Slide

Although the British government isn’t planning on selling its stake in the company anytime soon, Royal Bank of Scotland Group PLC (NYSE:RBS) shares have fallen by over 7% today regardless. Traders could be selling due to renewed Brexit uncertainty and its potential ramifications. The weaker British Pound makes Royal Bank of Scotland’s earnings worth less in dollar terms, and the cutting of some economic ties with the EU could potentially cause a recession in the United Kingdom, leading to higher loan losses at the bank. Shares of the bank have more than halved year-to-date. Ten top funds in our database owned shares of Royal Bank of Scotland Group PLC (NYSE:RBS) at the end of March.

On the next page we’ll check out why Versar Inc. and Telecom Italia SpA (ADR) are turning heads this afternoon.

Versar Surges on Contract

Shares of nano-cap Versar Inc. (NYSEMKT:VSR) have surged by almost 30% after the company announced that its subsidiary, J.M. Waller Associates, was awarded the A-E13ES multiple-award contract, with a combined contract ceiling of around $500 million for continued work on behalf of the Air Force Civil Engineer Center. The awarded contract is a follow-on contract to a former AFCEC 4PA-E08 contract and has a five-year period of performance. Three funds that we track had long positions in Versar Inc. (NYSEMKT:VSR) as of the most recent 13F reporting period, unchanged from a quarter earlier. As with all illiquid nano-caps, investors should perform due-diligence before buying or selling.

Analyst Downgrades Telecom Italia SpA 

Telecom Italia SpA (ADR) (NYSE:TI) has retreated by 9% today after analysts at JPMorgan downgraded the telecom stock to ‘Neutral’ from ‘Overweight’, citing additional competition. Apparently, Iliad has bought some assets from other telecoms and is poised to compete in Italy’s mobile sector. The increased competition from Iliad could increase user acquisition costs and lower per-user profitability for established telecoms like Telecom Italia. Three funds in our system were bullish on Telecom Italia SpA (ADR) (NYSE:TI) at the end of March.

Disclosure: None