Why Are These Four Stocks in Red on Tuesday?

With markets flat on Tuesday, let’s turn our attention to four stocks that are in the spotlight today, namely JetBlue Airways Corporation (NASDAQ:JBLU), Spirit Airlines Incorporated (NASDAQ:SAVE), Ford Motor Company (NYSE:F), UQM Technologies Inc (NYSEMKT:UQM). All four of them are trading lower today on the back of disappointing financial results and other developments. In this article we will take a closer look at the developments that stand behind their declines and will assess the hedge fund sentiment towards them in order to identify whether or not the market is overreacting and missing the big picture.

crystal51/Shutterstock.com

Hedge funds usually conduct due diligence while picking their investments since they usually operate with large amounts of capital and have to avoid high risks. This and the focus on long-term gains make hedge funds the perfect investors to emulate, as we determined through backtests covering the period between 1999 and 2012. However, in order to obtain the highest returns, the best way is to follow hedge funds into their most popular small-cap ideas. Our strategy involves imitating the 15 most popular small-cap picks among hedge funds and it has returned 102% since August 2012, beating the S&P 500 ETF (SPY) by some 53 percentage points (see more details here).

Without any further ado, let’s start with JetBlue Airways Corporation (NASDAQ:JBLU), whose stock has lost nearly 8% so far today, which has slightly offset its year-to-date gains of over 50%. Amid cheaper jet fuel, the company’s third quarter adjusted net income surged to $0.58 per share from $0.24 a year earlier, while revenue rose to $1.69 billion, from $1.53 billion and was in line with estimates. However, JetBlue Airways Corporation (NASDAQ:JBLU) posted a 0.6% decline in passenger revenue per available seat mile, which amounted to $0.1196. Among the funds from our database, 50 investors reported stakes equal to 11% of the company’s outstanding stock as of the end of June. Meanwhile, in the current 13F round, Louis Navellier‘s Navellier & Associates reported ownership of 36,347 shares of JetBlue Airways Corporation (NASDAQ:JBLU) held as of the end of September, which represents an increase of 10,323 shares over the quarter.

Shares of Spirit Airlines Incorporated (NASDAQ:SAVE) are also down on the back of third quarter results, which included adjusted EPS of $1.35 per share and revenue of $574.84 million. The EPS rose by 48% on the year and beat the estimates of $1.32, while revenue increased by 10% and came in slightly higher than the $571.82 million expected by analysts. However, Spirit Airlines Incorporated (NASDAQ:SAVE)’s stock has lost nearly 9%, most likely on the back of a 13% drop in total revenue per passenger flight segment, which was caused by a 21% fall in ticket revenue per passenger flight segment, affected by lower fares due to higher competition. The investors from our database are yet to be convinced regarding Spirit’s potential, since only 31 funds out of over 700 that we track held long stakes in the company at the end of June, although they held over 8% of its outstanding stock in aggregate. Bernard Selz‘s Selz Capital is one of the investors bullish on Spirit Airlines Incorporated (NASDAQ:SAVE), holding 105,000 shares as of the end of September.

On the following page, we will take a look at Ford Motor Company (NYSE:F)’s earnings, as well as at the developments behind the decline of UQM Technologies Inc (NYSEMKT:UQM)’s shares.

Ford Motor Company (NYSE:F)‘s stock is currently trading 4% in the red as the company posted better-than-expected revenue, but missed the consensus estimate on the bottom line. The company earned $0.45 per share in the third quarter, up from $0.24 reported a year earlier, but below the $0.46 expected by analysts. The automaker’s revenue also went up to $35.80 billion from $32.80 billion, as lower gasoline prices sent car sales higher in the U.S and Europe, beating the estimates of $35.07 billion. At the same time, even though the company had an operating margin of 6.5%, including 11.3% in the U.S, the company also said that its fourth quarter results will be affected by seasonal costs and payouts related to a new labor deal, as all Detroit automakers are currently in the process of negotiating new agreements with the United Auto Workers. Among the funds from our database, Ford Motor Company (NYSE:F) is not very popular, especially when compared to rival General Motors Company (NYSE:GM). A total of 39 funds held stakes in Ford at the end of June, as compared to 104 with stakes in GM.

UQM Technologies Inc (NYSEMKT:UQM)‘s stock started the day on a positive note, jumping by over 80% in pre-market trading on the back of the announcement of a ten-year supply agreement with a Chinese subsidiary of Eastlake New Energy, ITL Efficiency Corporation. UQM develops and sells electric motors, generators and electronic controllers for several markets, including automotive, marine and military. The production under the terms of the deal is expected to begin in 2017 and will result in over $400 million in revenue, as projected by the company. However, after a massive surge of UQM Technologies Inc (NYSEMKT:UQM)’s stock, it slid by over 18% in the first hours of trading and then slipped even more, currently trading around 45% in the red.

Disclosure: None