Why Are These Five Stocks Tanking Today?

With all three indices in the red today, several stocks opened lower and registered considerable losses in morning trading. In this article we are going to take a look at some of the top losers on Tuesday and the reasons behind their declines. Namely, we are going to discuss MannKind Corporation (NASDAQ:MNKD), Delta Air Lines, Inc. (NYSE:DAL), Republic Airways Holdings Inc. (NASDAQ:RJET), Whiting Petroleum Corp (NYSE:WLL), and Joy Global Inc. (NYSE:JOY). Let’s find out why investors are selling these five stocks today. We’ll also take the opportunity to examine the relevant hedge fund sentiment toward these stocks.

Why do we pay attention to hedge fund sentiment? Most investors ignore hedge funds’ moves because as a group their average net returns trailed the market since 2008 by a large margin. Unfortunately, most investors don’t realize that hedge funds are hedged and they also charge an arm and a leg, so they are likely to underperform the market in a bull market. We ignore their short positions and by imitating hedge funds’ stock picks independently, we don’t have to pay them a dime. Our research has shown that hedge funds’ long stock picks generate strong risk adjusted returns. For instance the 15 most popular small-cap stocks outperformed the S&P 500 Index by an average of 95 basis points per month in our back-tests spanning the 1999-2012 period. We have been tracking the performance of these stocks in real-time since the end of August 2012. After all, things change and we need to verify that back-test results aren’t just a statistical fluke. We weren’t proven wrong. These 15 stocks have managed to return 102% since September 2012 and outperformed the S&P 500 Index by 53 percentage points (see more details here).

Leading the way is MannKind Corporation (NASDAQ:MNKD), whose stock has plunged by 40%, after the announcement that Sanofi SA (ADR) (NYSE:SNY) had decided to end its agreement with MannKind and thus ended the commercialization of the inhaled insulin Afrezza. In 2014, Sanofi paid $150 million for the global rights to Afrezza and committed to pay a larger amount subject to Afrezza reaching certain goals. However, the deal was ended after Afrezza’s net sales were weak during the January-September period.

Among the funds we track, MannKind Corporation (NASDAQ:MNKD) lost some popularity during the third quarter, with a total of 13 funds reporting long positions in the company, versus 11 funds a quarter earlier. However, these funds amassed 3.30% of the company’s outstanding stock heading into the fourth quarter. Jonathan Savitz‘s Greywolf Capital Management reported owning 9.08 million shares of MannKind Corporation in its latest 13F filing, having decreased its stake by 19% over the quarter.

In Tuesday morning trading, Delta Air Lines, Inc. (NYSE:DAL)’s stock has declined by nearly 1% after reporting a decline of 5% on the year in consolidated passenger revenue per available seat mile for December. The appreciation of the U.S. dollar and Thanksgiving holiday had a negative impact on the metric. Now, the company forecasts a unit revenue decline of 1.5% in the fourth quarter. Among the funds we follow, 109 reported long positions in Delta Air Lines, Inc. (NYSE:DAL) as of the end of September, down by five funds from a quarter earlier. Alex Snow‘s Lansdowne Partners is the largest shareholder of the company among the investors we follow, owning 26.57 million shares, according to its last 13F filing.

It hasn’t been a good day for Republic Airways Holdings Inc. (NASDAQ:RJET) investors, as the stock is down by more than 13% after the analysts at Deutsche Bank downgraded the firm to ‘Hold’ from ‘Buy’ and lowered the price target to $4 from $8. The analysts cited the 50% drop in its EPS estimate for next year. The hedge fund sentiment towards Republic Airways Holdings Inc. (NASDAQ:RJET) has been steady, as the number of funds long the stock remained unchanged at 18 at the end of the third quarter. Among the Republic Airways Holdings Inc. (NASDAQ:RJET) bulls is Ross Margolies‘ Stelliam Investment Management, owning a stake of 5.40 million shares.

Along with this bearish movement, shares of Whiting Petroleum Corp (NYSE:WLL) are down today by almost 6%, eliminating the gains recorded in the previous couple of sessions. Investors are selling after analysts at Evercore ISI downgraded the stock to ‘Hold’ from ‘Buy’ and analysts at Citigroup lowered their price target to $20 from $25. Out of the 730 funds that we track, 42 funds reported holding shares of the company as of the end of September, amassing 24.6% of the float. John Paulson’s Paulson & Co has the most valuable position in Whiting Petroleum Corp, worth $146.6 million.

Last on our list is Joy Global Inc. (NYSE:JOY), whose shares are off by 7%. The stock has been dragged down by the overall fall in the Chinese stock on the back of a possible economic slowdown. Yesterday, analysts at UBS downgraded the firm to ‘Sell’ from ‘Neutral’ and lowered their price target to $8 from $9. UBS’ downgrade comes on the back of weaker earnings due to commodity volatility and after Joy Global shares slid by more than 70% during the past year. The smart money seems to be fond Joy Global Inc. (NYSE:JOY), with Robert Rodriguez and Steven Romick‘s First Pacific Advisors LLC owning a stake of 3.94 million shares. Among the funds we follow, 28 reported long positions in Joy Global Inc. (NYSE:JOY) as of the end of September, up by nine funds from a quarter earlier. Those funds collectively amassed around 17.4% of Joy Global’s float.

Disclosure: none