Why Are Investors Heading For The Exits In These Five Stocks Today?

In yet another volatile trading session, the S&P 500 is off by more than 0.8% and the NASDAQ is down by 0.84% as investors weigh the negative implications of a Federal Reserve interest rate hike. Among today’s losers are Cemex SAB de CV (ADR) (NYSE:CX), Enterprise Products Partners L.P. (NYSE:EPD), Netflix, Inc. (NASDAQ:NFLX), Twitter Inc (NYSE:TWTR), and bluebird bio Inc (NASDAQ:BLUE). Let’s find out why investors are selling these five stocks.

Let’s also analyze relevant hedge fund sentiment toward these stocks. Most investors don’t understand hedge funds and indicators that are based on hedge funds’ activities. They ignore hedge funds because of their recent poor performance in the bull market. Our research indicates that hedge funds underperformed because they aren’t 100% long. Hedge fund fees are also very large compared to the returns generated and they reduce the net returns experienced by investors. We uncovered that hedge funds’ long positions actually outperformed the market. For instance the 15 most popular small-cap stocks among funds beat the S&P 500 Index by 52 percentage points since the end of August 2012. These stocks returned a cumulative of 102% vs. a 48.6% gain for the S&P 500 Index (see the details here). That’s why we believe investors should pay attention to what hedge funds are buying (rather than what their net returns are).

First up, Cemex SAB de CV (ADR) (NYSE:CX) has lost 2.68% as the analysts at Morgan Stanley remain cautious towards the Mexican cement company. Although the analysts expect the cement demand to be strong next year, with pricing likely to rise faster than inflation, they think the long term picture for Cemex SAB de CV (ADR) (NYSE:CX) is still cloudy, as industry costs are too high and the return on capital is too low. Of the around 730 elite funds we track, 18 funds owned Cemex in the third quarter, with Ken Fisher’s Fisher Asset Management and Cliff Asness’ AQR Capital Management among them.

Along with other midstream oil and gas companies, Enterprise Products Partners L.P. (NYSE:EPD) shares are down today because of declining energy futures prices and worry that Kinder Morgan Inc (NYSE:KMI) might cut its dividend. Because its fundamentals are more secure than Kinder’s, Enterprise Products Partners L.P. (NYSE:EPD) shares are only off 6.4% versus other midstream companies that have seen their shares fall by double digits today, however. In the long run, EPD shares should rebound as oil prices recover.

In other news, Netflix, Inc. (NASDAQ:NFLX) has lost 3.69% after the company said that it might have difficulty striking global licensing deals in the future at the UBS Global Media and Communications Conference. At the conference Netflix revealed it has 31 original series and 10 films planned for release on its streaming platform next year. Shares could also be down on profit taking, given that Netflix, Inc. (NASDAQ:NFLX) shares recently hit an all-time high. A total of 57 funds from our database were long Netflix at the end of the third quarter, up from 50 funds a quarter earlier.

On the next page, we examine why Twitter and bluebird bio have lost ground.

In the first few months of the Jack Dorsey-as-CEO era, Twitter Inc (NYSE:TWTR) shares haven’t done well, as they are only 14% above their 52 week low and have inched down by 2.8% today. Although it remains the first place for hundreds of millions of people around the world to get the latest news that matter, Twitter Inc (NYSE:TWTR) has struggled to monetize its audience. The company’s earnings results have disappointed the bulls in recent quarters and given its current lineup of products, it also seems Twitter’s U.S. MAU growth is a thing of the past. Many investors hope Twitter introduces new products that can bring more people into the fold and better monetize the service. Our data show that the smart money has been more cautious about Twitter, with only 27 funds long the stock at the end of September, versus 47 funds at the end of June.

Lastly, Bluebird bio Inc (NASDAQ:BLUE) dropped by 36% in afternoon trading, on the back of the company releasing disappointing results for its gene therapy in sickle cell disease and beta thalassemia candidate, LentiGlobin BB305. According to the data from a Phase 1 sickle cell disease trial, patients have not responded as quickly as expected to the drug, with the proportion of anti-sickling hemoglobin at 17% and 16% in two patients three months post infusion, versus the 30% needed to have a clinical effect. The data also showed disappointing results in another trial for a subtype of beta thalassemia. Andreas Halvorsen’s Viking Global owned 615,557 shares of Bluebird bio at the end of September.

Disclosure:None