Why are These Stocks Surging Amid Today’s Gloomy Market?

U.S. stocks are trading mostly lower today, as oil and economic data have put pressure on the market. Sluggish results from major retailers continue to have a negative impact on the market as investors are also digesting the latest economic data related to employment. Some stocks stood out this morning, managing to surge higher despite the gloomy atmosphere in the market. Let’s have a look at what got investors excited about Angie’s List Inc (NASDAQ:ANGI), Sally Beauty Holdings, Inc. (NYSE:SBH), Kohl’s Corporation (NYSE:KSS) and Eros International plc (NYSE:EROS).

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Hedge funds have been underperforming the market for a very long time. However, this was mainly because of the huge fees that hedge funds charge as well as the poor performance of their short books. Hedge funds’ long positions performed actually better than the market. Small-cap stocks, activist targets, and spin offs were among the bright spots in hedge funds’ portfolios. For instance, the 15 most popular small-cap stocks among hedge funds outperformed the market by more than 53 percentage points since the end of August 2012 (read the details here). This strategy also managed to beat the market by double digits annually in our back tests covering the 1999-2012 period.

IAC/InterActiveCorp (NASDAQ:IACI) has made an unsolicited bid to acquire Angie’s List Inc (NASDAQ:ANGI) for $512 million in cash, but has also proposed a combination of Angie’s List and its own HomeAdvisor business through a stock-for-stock exchange as an alternative. The offer is the equivalent of $8.75 per share, which constitutes a 10% premium over Angie’s closing price on Wednesday. In a press release Angie’s List has confirmed its willingness to consider the stock-for-stock exchange, but has made no reference to the takeover bid. According to a letter sent to the board of Angie’s List, Joey Levin, CEO of IAC/InterActiveCorp (NASDAQ:IACI), said his company was disappointed by Angie’s refusal to discuss a transaction after a meeting in October. It looks like a takeover deal is not on the cards.

Wallace Weitz is among those who would benefit handsomely from the deal, as Wallace R. Weitz & Co. held 3.59 million shares of Angie’s List at the end of June, the largest investment among the funds we follow. In general, Angie’s List Inc (NASDAQ:ANGI) is not a very popular stock among these funds, as only 14 reported a long position as of the end of June, overseeing 17.7% of the company’s common stock.

Shares of Sally Beauty Holdings, Inc. (NYSE:SBH) have jumped this morning despite mixed financial results for fiscal fourth quarter. The retailer of beauty products has posted revenues of $964 million, topping analysts forecasts of $958 million, while adjusted earnings of $0.38 per share were just shy of the Wall Street’s estimates of $0.39 per share. The company also reported full year figures which are as follows: $3.83 billion in revenues and a profit of $1.49 per share.

At the end of the second quarter, 26 funds we track had Sally Beauty Holdings, Inc. (NYSE:SBH) in their portfolio, holding an aggregate of 10.7% of shares outstanding. Billionaire Ken Griffin is bullish on this stock, having boosted his stake by 89% over the quarter to amass some 3.83 million shares, while Israel Englander had also been buying the stock. Millennium Management reported a 109% increase in its holding of the stock to 2.31 million shares in its latest 13F filing.