Why Are Traders Piling Into These Stocks?

Crude futures are up more than 2% this morning as weakness in the dollar and supply disturbances boost sentiment. Not surprisingly, all three major indexes are noticeably higher as well. The Dow is up over 110 points, while the S&P 500 and NASDAQ are around 0.5% higher. Among the stocks rallying today are Bitauto Hldg Ltd (ADR) (NYSE:BITA), Baidu Inc (ADR) (NASDAQ:BIDU), JD.Com Inc(ADR) (NASDAQ:JD), Petroleo Brasileiro SA Petrobras (ADR) (NYSE:PBR), and Cyclacel Pharmaceuticals Inc (NASDAQ:CYCC). Let’s find out why traders are buying and see what elite funds think about these stocks.

While there are many metrics that investors can assess in the investment process, the hedge fund sentiment is something that is often overlooked. However, hedge funds and other institutional investors allocate significant resources while making their bets and their long-term focus makes them the perfect investors to emulate. This is supported by our research, which determined that following the small-cap stocks that hedge funds are collectively bullish on can help a smaller investor to beat the S&P 500 by around 95 basis points per month (see the details here).

Major Chinese Companies Invest in Another Chinese company

Chinese search leader Baidu Inc (ADR) (NASDAQ:BIDU) and e-commerce giant JD.Com Inc (ADR) (NASDAQ:JD) are each investing $50 million in Bitauto Hldg Ltd (ADR) (NYSE:BITA). Bitauto Hldg Ltd (ADR) (NYSE:BITA) is a leading provider of internet content and marketing services for China’s fast-growing automotive industry. Under the terms of the deal, Baidu, JD.com and Tencent will each buy 2,471,577 newly-issued ordinary shares of Bitauto at $20.23 apiece. In addition, Bitauto entered into a definitive agreement with PA Grand Opportunity Limited to issue convertible bonds to the entity and its affiliates in an aggregate principal amount of up to $150 million. The convertible bonds will have an annual interest rate of 2% and will mature in five years. At any time after three months, the convertible bonds can be excised with an initial conversion price of $23.67. Current Bitauto CEO, William Li, will indirectly purchase part of the convertible bonds through PA Grand Opportunity Limited. Bitauto intends to use the proceeds raised for general corporate purposes.

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Seeing as the Chinese government wants a healthy start-up scene, look for China’s large tech companies to continue to participate in similar arrangements with both public and private companies with potential. Baidu Inc (ADR) (NASDAQ:BIDU) and JD.Com Inc (ADR) (NASDAQ:JD) shares are each up over 1% in morning trading while Bitauto shares are up over 13%. According to our database of 766 elite funds, JD.com was the most popular at the end of March, with 73 elite funds holding shares. Baidu was next with 72 funds and Bitauto was last with 10 funds reporting long positions as of the end of March.

On the next page, we examine Petroleo Brasileiro SA Petrobras, and Cyclacel Pharmaceuticals.

Brazil’s Government Supports Petrobras Pricing Independence

Although Petroleo Brasileiro SA Petrobras (ADR) (NYSE:PBR) may be state-controlled, Brazil’s energy ministry said over the weekend that it supports full freedom for Petrobras to set fuel prices based on economics going forward rather than based on government interests as before. Partly because Petrobras was run for government interests, the company has been saddled with substantial debt and has had to deal with corruption. Higher fuel prices could help Petroleo Brasileiro SA Petrobras (ADR) (NYSE:PBR) finance its around $130 billion in debt and to become more profitable. Ken Fisher’s Fisher Asset Management owned more than 10.5 million shares at the end of the first quarter.

Cyclacel Pharmaceuticals Surges After ASCO Presentation

Nano-cap Cyclacel Pharmaceuticals Inc (NASDAQ:CYCC) is 62% higher after the company reported updated data from its DNA Damage Response Program on the Seliciclib and Sapacitabine combination for patients with solid tumors. The updated data is from a Phase 1 clinical trial, and showed anti-tumor activity in a subgroup of 45 patients with ovarian, breast, and pancreatic cancers who tested positive for BRCA mutations (44 germline and 1 sporadic) with a 35.6% disease control rate. Based on the results, the company believes further clinical evaluation of the combination is justified. Four funds held $826,000 of Cyclacel Pharmaceuticals Inc (NASDAQ:CYCC) at the end of March.

Disclosure: none