Why Are These Four Stocks Declining on Monday?

Major stock indices inched down on Monday amid M&A-related and macroeconomic news and ahead of the two-day Fed meeting. Among the decliners are four stocks sliding on Monday on the back of different developments, including PGT, Inc. (NASDAQ:PGTI), Cirrus Logic, Inc. (NASDAQ:CRUS), Sprouts Farmers Market Inc (NASDAQ:SFM), and Helix Energy Solutions Group Inc (NYSE:HLX). Let’s take a closer look at what sent them down today and what the smart money sentiment is towards them.

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At Insider Monkey our main focus is to study hedge fund sentiment, because we believe that this metric can suggest whether or not a stock represents a good trading opportunity for the long term. Extensive backtests we conducted that covered the period between 1999 and 2012 showed that imitating some of the hedge funds’ long picks can generate substantial returns, despite the collective average underperformance of the industry and the delays in filings. For example, the 15 most popular small-cap stocks among hedge funds, which represent the focus of our investment strategy, have returned 102% since August 2012 and outperformed the S&P 500 ETF (SPY) by around 53 percentage points (see more details here).

PGT, Inc. (NASDAQ:PGTI)‘s stock has slid by over 21% amid the release of the new home sales data for September, released earlier today. The sales drop comes after two straight months of increases and amounted to 11.5%, to 468,000 units on a seasonally-adjusted annual rate. This represented the lowest homes sales since November 2014, and has offset the bullish sentiment towards the sector. PGT, Inc. (NASDAQ:PGTI) is directly related to the sector, as it is engaged in the manufacturing and distribution of residential windows and doors. Also earlier today, Dougherty & Co downgraded the stock to ‘Neutral’ from ‘Buy’. PGT, Inc. is also not very popular among the funds we track, since only 18 out of over 730 such funds reported long positions equal to around 15% of the company as of the end of June. One of these funds was Jim Simons‘ Renaissance Technologies, which owned 3.10 million shares at the end of the second quarter.

Shares of Cirrus Logic, Inc. (NASDAQ:CRUS) have lost 13% today, two days before the company is scheduled to release its results for the previous quarter. Today’s decline comes on the back of investors’ concerns that the company will not be able to meet earnings expectations. The concerns are not unjustified, since earlier today, one of Cirrus Logic, Inc. (NASDAQ:CRUS)’s peers in the semiconductor industry reported very weak financial results for the third quarter. The results also sparked a sell-off in Apple Inc. (NASDAQ:AAPL)’s stock a day before its own results, since Dialog, as a supplier, has a substantial part of its business tied to Apple. According to Cirrus Logic’s most recent 10-Q report, the company had around 62% of its total sales through Apple Inc. (NASDAQ:AAPL) in its first quarter of fiscal 2016. At the end of June, 25 funds from our database held long positions in Cirrus Logic, equal to 9.50% of its outstanding stock.

The stock of food retailer Sprouts Farmers Market Inc (NASDAQ:SFM) has declined by 10% amid growing concerns of rising competition from bigger retailers, such as Wal-Mart Stores, Inc. (NYSE:WMT), which are increasing their offerings of organic products, eating into the market share of organic food retailers like Sprouts Farmers Market Inc (NASDAQ:SFM). Another stock that plunged today for the same reason is Whole Foods Market, Inc. (NASDAQ:WFM), which we covered earlier today (see article). However, Whole Foods’ stock has lost only 5% so far, and hedge funds from our database are more bullish on it than they are on Sprouts Farmers Market. Only 14 funds from our database reported long stakes in Sprouts Farmers Market, as compared with 32 investors that held positions in Whole Foods at the end of June.

Last but not least is Helix Energy Solutions Group Inc (NYSE:HLX), whose stock has fallen by 9%, extending the decline of the last couple of days, which have offset the 26% surge registered on October 20 on the back of positive financial results. Last week, the Street downgraded the stock to ‘Sell’ from ‘Hold’ citing concerns regarding the company’s prospects, which are being affected by falling net income and weak return on equity (ROE), among other things. Helix’s ROE is indeed small, as it currently stands at around 2.1% for the trailing 12-month period, almost half the industry average. Helix Energy Solutions Group Inc (NYSE:HLX)’s stock is 73% in the red year-to-date and the sentiment among the funds from our database is weak, with only 15 reporting long positions equal to 7% of the company’s float as of the end of June.

Disclosure: None