Why Are These Stocks Surging on Friday?

With the NASDAQ up by 0.48% in morning trading after the horrendous losses yesterday, shares of tech companies Microsoft Corporation (NASDAQ:MSFT), FuelCell Energy Inc (NASDAQ:FCEL), Sunedison Inc (NYSE:SUNE), Facebook Inc (NASDAQ:FB), and Nokia Corporation (ADR) (NYSE:NOK) are each in the green. Let’s take a closer look at each stock and see the developments behind their gains today.

In addition, we are going to assess hedge fund sentiment toward the stocks, if relevant. Why do we pay attention to hedge fund sentiment. Most investors ignore hedge funds’ moves because as a group their average net returns trailed the market since 2008 by a large margin. Unfortunately, most investors don’t realize that hedge funds are hedged and they also charge an arm and a leg, so they are likely to underperform the market in a bull market. We ignore their short positions and by imitating hedge funds’ stock picks independently, we don’t have to pay them a dime. Our research has shown that hedge funds’ long stock picks generate strong risk adjusted returns. For instance the 15 most popular small-cap stocks outperformed the S&P 500 Index by an average of 95 basis points per month in our back-tests spanning the 1999-2012 period. We have been tracking the performance of these stocks in real-time since the end of August 2012. After all, things change and we need to verify that back-test results aren’t just a statistical fluke. We weren’t proven wrong. These 15 stocks managed to return 102% over the last 37 months and outperformed the S&P 500 Index by 53 percentage points (see the details here).

Microsoft Corporation (NASDAQ:MSFT) shares are up by 1.46% after the analysts at BMO Capital initiated an ‘Outperform’ rating on the tech giant today. For all its troubles in mobile and search, Microsoft Corporation (NASDAQ:MSFT) still dominates the PC and enterprise sector and is still fantastically profitable. The company’s transition to Windows 10 is also proceeding nicely, with the operating system now installed on more than 200 million devices. Shares trade at under 17 times forward earnings and have a dividend yield of 2.76%.

Shares of FuelCell Energy Inc (NASDAQ:FCEL) have jumped by 20% after the Connecticut Siting Council gave the ‘go ahead’ for a 63.3 MW fuel cell power plant in the state that will use FuelCell Energy products. Analysts see the approval of the project as a ‘huge win’, as Cowen & Co analyst Jeffrey Osborne believes the project will yield up to $500 million in sales for the company.

On the next page, we examine Sunedison Inc, Facebook Inc, and Nokia Corporation (ADR).

Sunedison Inc (NYSE:SUNE)’s shares have advanced by 7.34% in morning trading on the back of two analyst upgrades. The analysts at Axiom Securities and Avondale Partners both bumped up their ratings on the beleaguered stock to ‘Outperform’ from ‘Hold’ on the belief that Sunedison Inc (NYSE:SUNE)’s painful deleveraging and diluting steps are de-risking the company and allowing management to move forward with the big renewable energy opportunity ahead of it. The Avondale analysts believe that the news flow over Sunedison will get better, as investors “focus on the company’s ability to generate up to $1 billion in cash flow between now and its next debt maturities in early 3Q18”. Of the around 730 elite funds we track, 73 funds owned $1.06 billion worth of Sunedison shares (accounting for 46.80% of the float) at the end of September.

After yesterday’s over 4% retreat, Facebook Inc (NASDAQ:FB) bounced back by 2% in morning trading as investors snap up the company because of its long term potential. The social media and messaging company continues to grow, as Facebook Messenger has now topped 800 million active users and WhatsApp has exceeded 900 million. With Asian messaging companies making substantially more in terms of profit per messaging app user, Facebook Inc (NASDAQ:FB) has a lot of EPS growth left. Shares trade at 34 times forward earnings, but smart money investors are bullish with 128 funds from our database holding shares of Facebook as of the end of September.

Nokia Corporation (ADR) (NYSE:NOK) is 3% in the green today as investors become more optimistic on the company’s future growth prospects. The telecom giant officially took control of rival Alcatel-Lucent in a 15.6 billion euro ($17 billion) all-stock deal this week and plans to begin integrating operations between the two companies next week. The hedge fund sentiment towards Nokia Corporation (ADR) (NYSE:NOK) has been stable, with the number of funds (among those we track) owning shares of the tech giant rising by one to 24 during the third quarter.

Disclosure: none