Why CarMax, Teva Pharmaceuticals And Three Other Stocks Are in Spotlight on Tuesday

Crude prices are 1.5% lower today as traders are taking profits on yesterday’s run-up. Although most investors expect Britain to remain in the EU following Thursday’s referendum, the event isn’t guaranteed yet and the markets could remain volatile if polls show the ‘exit’ side gaining strength.

In this article, we take a closer look at why CarMax, Inc (NYSE:KMX), International Game Technology Ordinary Shares (NYSE:IGT), Impax Laboratories Inc (NASDAQ:IPXL), Teva Pharmaceutical Industries Ltd (ADR) (NYSE:TEVA), and Royal Bank of Scotland Group PLC (NYSE:RBS) are trending and see how the funds from our database are positioned towards them.

Hedge fund sentiment is an important metric for assessing the long-term profitability. At Insider Monkey, we track over 700 hedge funds, whose quarterly 13F filings we analyze and determine their collective sentiment towards several thousand stocks. However, our research has shown that the best strategy is to follow hedge funds into their small-cap picks. This approach can allow monthly returns of nearly 95 basis points above the market, as we determined through extensive backtests covering the period between 1999 and 2012 (see the details here).

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CarMax Reports Earnings

CarMax, Inc (NYSE:KMX) earned $0.90 per share on revenue of $4.13 billion for its fiscal first quarter, missing the consensus estimates by $0.02 per share and $60 million, respectively. Although used vehicle unit sales rose by 4% year-over-year, they only increased by 0.2% on a comparable-store basis. CarMax Auto Finance income declined by 7.7% year-over-year to $100.8 million, mainly due to an increase in the provision for loan losses and a lower total interest margin percentage. In terms of guidance, CarMax anticipates opening 15 stores in fiscal 2017 and between 13 to 16 stores in fiscal 2018. A total of 17 funds from our database owned shares of CarMax, Inc (NYSE:KMX) at the end of March.

International Game Technology Expands Distribution

International Game Technology Ordinary Shares (NYSE:IGT) is in the spotlight today after the company announced its comprehensive casino management systems solution, Universal Game Adaptor, is available for deployment in casinos throughout the state of Mississippi. The increased distribution should lead to more sales and cash flow for the leading gaming maker. Shares of the company trade at only 9.0 times forward earnings estimates and yield a 4.18% dividend at current prices. Of the 766 funds we track, 22 funds owned $542.12 million worth of International Game Technology Ordinary Shares (NYSE:IGT)’s stock, which accounted for 17.20% of the float on March 31, versus 20 funds and $478.68 million, respectively, on December 31.

On the next page, we examine Impax Laboratories, Teva Pharmaceutical Industries Ltd, and Royal Bank of Scotland Group PLC.

Impax Laboratories Inc (NASDAQ:IPXL)

Impax Laboratories Inc (NASDAQ:IPXL) and Teva Pharmaceutical Industries Ltd (ADR) (NYSE:TEVA) are in the spotlight after Impax agreed to buy the rights to 15 generic drugs on the market, and several pipeline/approved not launched generic drugs from Teva and the soon-to-be-acquired Allergan generic division for $586 million. Teva is divesting the generic drugs to ensure that its merger with Allergan’s generic division goes through. Impax management estimates the deal will add around $50 million to 2016 EBITDA, expand gross margins by several hundred basis points, and increase adjusted EPS growth to at least 20% from 10%. A total of 20 funds tracked by us owned shares of Impax Laboratories Inc (NASDAQ:IPXL) at the end of March, while 70 funds owned shares of Teva Pharmaceutical Industries Ltd (ADR) (NYSE:TEVA).

Royal Bank of Scotland Continues Cost Cuts

Although latest polls show that Britain isn’t likely to leave the EU, Royal Bank of Scotland Group PLC (NYSE:RBS)’s management is nevertheless cutting costs. According to Reuters, the bank is planning to trim its UK workforce by 900 people, with the layoffs concentrated in the IT and back office segments that support the retail, commercial, and private banking. Royal Bank of Scotland Group is cutting costs to improve profitability. At the end of March, 10 funds in our database owned shares of Royal Bank of Scotland Group PLC (NYSE:RBS).

Disclosure: none