Why Are These Steel And Biotech Stocks Deep In Red Today?

There is strong market activity in the last full trading day ahead of the Christmas weekend. U.S. stocks are in green territory, with the Dow up by triple digits, spurred by an increase in oil prices. In this article, however, we’ll talk steel and biotechnology stocks to find out why United States Steel Corporation (NYSE:X), AK Steel Holding Corporation (NYSE:AKS), Great Basin Scientific Inc (NASDAQ:GBSN), Northwest Biotherapeutics, Inc (NASDAQ:NWBO) and Seres Therapeutics Inc (NASDAQ:MCRB) are trending lower today. In addition, we are going to assess the hedge fund sentiment towards these stocks.

In the eyes of most traders, hedge funds are assumed to be underperforming, old investment tools of the past. While there are more than 8,000 funds in operation at present, Insider Monkey looks at only the aristocrats of this group, around 730 funds. Contrary to popular belief, Insider Monkey’s research revealed that hedge funds underperformed in recent years because of their short positions as well as the huge fees that they charge, not because they are not good at picking stocks on the long side of their portfolios. Hedge funds did in fact manage to outperform the market on the long side of their portfolios. In fact, the 15 most popular small-cap stocks among hedge funds has returned 102% since the end of August 2012, beat the S&P 500 Index by 53 percentage points (see the details here).

United States Steel Corporation (NYSE:X) opened higher this morning, but has retracted since the bell. This comes after the company recently announced plans to delay the construction of an electric arc furnace at its Fairfield Works plant in Alabama. A mix of low steel prices and increased imports from abroad have prompted the management to halt their development plans until market conditions improve.

Hedge fund affection for United States Steel Corporation (NYSE:X) cooled down a bit during the third quarter, with the number of funds invested in the company dropping to 25 from 29. Ken Griffin was among those scrambling for the exit, dumping 87% of his stake in the process. In its latest 13F filing, Citadel Investment Group reported ownership of 1.27 million shares valued at $13.2 million.

Another company affected by the slump in the steel market, AK Steel Holding Corporation (NYSE:AKS) shares are down by roughly 3% from yesterday’s closing price. The company’s board of directors has welcomed a new member according to a press release published yesterday. Gregory B. Kenny, who is currently serving as adviser to Michael McDonnell, the CEO of General Cable Corporation (NYSE:BGC), is set to assume his role on January 1, 2016, with AK Steel putting great value of his knowledge and experience in the manufacturing sector.

At the end of the quarter, roughly 12.5% of AK Steel Holding Corporation (NYSE:AKS)’s common stock was held by 19 funds from our database, down from 20 a quarter earlier. Kenneth Tropin’s Graham Capital Management holds the largest stake in the company among the funds we follow: 14.5 million shares worth $10.3 million disclosed as of the end of September.

Great Basin Scientific Inc (NASDAQ:GBSN) took a nosedive this morning, after two law firms announced investigations into alleged securities fraud related to the company’s public offering back in February. Robbins Arroyo LLP and Levi & Korsinsky, LLP are investigating whether the company management has violated federal securities laws when it approved the offering of 2,724,000 units, which could be converted into preferred stock and warrants. The company was thus forced to issue a large amount of shares, leading to a considerable dilution, causing losses for existing shareholders.

Great Basin Scientific Inc (NASDAQ:GBSN) is not a popular stock among hedge funds, with only three of them reporting a stake in the company in the last round of 13F filings, unchanged over the quarter. Ross Berman is bullish on the stock, having massively increased his holding during the quarter to 66,537 shares worth $405,000.

Investors are not impressed by Northwest Biotherapeutics, Inc (NASDAQ:NWBO)‘s latest deal to raise funds, driving the stock lower by as much as 21% during the first hours of trading today. The company announced a deal with healthcare focused institutional investors for a direct offer of 3.5 million shares of common stock at a price of $3.60 per share, which would bring approximately $12.6 million into the coffers. Investors will also receive warrants to purchase an additional 1.75 million shares at an exercise price of $4.50 per share. In other news, Shareholder rights law firm Robbins Arroyo LLP said yesterday that it has filed a suit against Northwest Biotherapeutics for allegedly misleading investors by making false statements regarding the business prospects of the company.

The fan club of Northwest Biotherapeutics, Inc (NASDAQ:NWBO) among the funds we track grew by three new members during the third quarter, with 12 top hedge funds holding a total of 27.5% of the company’s outstanding stock. Neil Woodford sees great upside potential in Northwest Biotherapeutics, having initiated and built a sizable position in the company over the third quarter, which accounts for nearly 8% of his portfolio. According to its latest 13F filing, Woodford Investment Management holds 20.5 million shares valued at approximately $128 million.

Seres Therapeutics Inc (NASDAQ:MCRB) is another biotechnology stock that is dwelling in the red today, after shares opened lower and fell by as much as 7% during the first hour of trading. The stock has been recently upgraded by Zacks Investment Research to a Hold from the previous Sell rating. The company went public in the beginning of June 2015, reaching a high of $51.40, but has fallen by nearly 30% since then, with shares currently trading at $36 apiece.

Peter Kolchinsky‘s RA Capital Management holds the largest stake in Seres Therapeutics Inc (NASDAQ:MCRB) among the funds we track: 246,645 shares valued at $7.31 million according to its latest quarterly report. Hedge funds from our database have a weak presence among the shareholders of Seres Therapeutics Inc (NASDAQ:MCRB), as only 10 funds reported holding just 3.7% of the company’s common stock as of the end of September.

Disclosure: none.