Why Are These Stocks In The Red Amid Today’s Rally?

It looks like U.S. stocks are set to end 2015 on a positive note, with most sectors rallying today, pushed by a solid advance in oil prices. Not all investors are smiling, though, with Valeant Pharmaceuticals Intl Inc (NYSE:VRX), BlackBerry Ltd (NASDAQ:BBRY), Rovi Corporation (NASDAQ:ROVI), Sunedison Inc (NYSE:SUNE) and Anavex Life Sciences Corp. (NASDAQ:AVXL) lagging behind in the red territory. Let’s find out why market participants are pushing these stocks lower today.

We track hedge funds and prominent investors because our research has shown that historically their stock picks delivered superior risk-adjusted returns. This is especially true in the small-cap space. The 50 most popular large-cap stocks among hedge funds had a monthly alpha of about 6 basis points per month between 1999 and 2012; however the 15 most popular small-cap stocks delivered a monthly alpha of 80 basis points during the same period. This means investors would have generated 10 percentage points of alpha per year simply by imitating hedge funds’ top 15 small-cap ideas. We have been tracking the performance of these stocks since the end of August 2012 in real time and these stocks beat the market by 53 percentage points (102% return vs. S&P 500’s 48.7% gain) over the last 39 months (see the details here).

Valeant Pharmaceuticals Intl Inc (NYSE: VRX) stock continues its fall today, after the stock ended yesterday’s trading session down by 10%. The reason behind this move was news that a trio of company executives have taken over the duties of CEO Michael Pearson, who is on medical leave. With Valeant having faced some credibility issues lately, the fact that a group of executives, as opposed to any one person, was chosen to take over in Pearson’s absence is a signal that the company is still on a weak footing. So far today, the stock has fallen as much as 2% before regaining some of the losses.

At the end of the third quarter, roughly 29% of Valeant Pharmaceuticals Intl Inc (NYSE:VRX)’s common stock was held by 88 elite funds, down from 98 at the end of June. Stephen Mandel took the opportunity to load up on Valeant shares on a dip, boosting his stake by 41% during the quarter to 7.46 million shares, according to Lone Pine Capital’s latest 13F filing.

BlackBerry Ltd (NASDAQ:BBRY) shares are slightly down, with investors catching their breath following a strong rally that started on December 10. The stock has surged by nearly 30% since then, as market participants are turning bullish on the Canadian communications giant. The company’s latest financial report has offered a great boost of confidence to BlackBerry bulls, having reported solid increases in revenues from software and technology licensing businesses. Moreover, BlackBerry recently launched an Android-based device which is in great demand and analysts believe it will play a major role in rebuilding the company’s crumbling smartphone business.

Hedge funds chose to distance themselves from BlackBerry Ltd (NASDAQ:BBRY) during the third quarter, with the number of long positions decreasing to 18 from 23 a quarter earlier. Prem Watsa‘s Fairfax Financial Holdings is the largest holder of the stock among the funds we track, having reported ownership of 46.7 million shares in its latest quarterly filing.