Why Hudson Technologies, Spirit Airlines, DragonWave, and Two Other Stocks Are in Spotlight

Crude futures are slightly lower today as traders await the latest API inventory report. Not surprisingly, all three indexes opened slightly in the red as investors digest the latest earnings releases.

Among the stocks traders are talking about today are Hudson Technologies, Inc. (NASDAQ:HDSN), Spirit Airlines Incorporated (NASDAQ:SAVE), Super Micro Computer, Inc. (NASDAQ:SMCI), DragonWave, Inc. (USA) (NASDAQ:DRWI), and Cobalt International Energy, Inc. (NYSE:CIE). Let’s take a closer look at the five stocks and see how elite funds 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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Hudson Momentum Continues

A day after surging more than 8%, Hudson Technologies, Inc. (NASDAQ:HDSN) shares opened over 40% in the green. Traders are buying after the company announced that the United States Defense Logistics Agency has awarded the company, as a prime contractor, a five-year contract including a five year renewal option with an estimated maximum value of $400 million. The fixed price contract is for management and supply of various products such as compressed gases, refrigerants, cylinders, and other items. Management believes the award will contribute to considerable future revenue and earnings growth. Just two funds among those we track owned $10.68 million worth of Hudson Technologies, Inc. (NASDAQ:HDSN)’s stock, which accounted for 9.90% of the float on March 31.

Spirit Flies Lower on Guidance

Spirit Airlines Incorporated (NASDAQ:SAVE) shares are down by over 6% after the airline issued preliminary second quarter guidance numbers. For the quarter, management expects operating margin of around 22%, in-line with previous guidance, and a modest sequential decline in non-ticket revenue per passenger flight segment (PFS), with the airline reporting $51.32 in non-ticket sales per PFs. The total revenue per available seat mile number came in at the low end of the initial guided range and adjusted cost per available seat mile (CASM) excluding fuel is seen to have inched lower by 8% year-over-year. Among the funds from our database, 28 funds owned shares of Spirit Airlines Incorporated (NASDAQ:SAVE) at the end of the first quarter.

On the next page, we examine why Super Micro Computer, DragonWave, and Cobalt International Energy are trending today.

Super Micro Slumps on Weaker Guidance

Super Micro Computer, Inc. (NASDAQ:SMCI) has slumped by over 26% after the tech company issued soft preliminary results for its fiscal fourth quarter. Due to lower demand, Super Micro now sees revenue coming in at $520 million to $524 million, versus the previous guidance of $580 million to $640 million. Non-GAAP gross margin is expected at 14%, due to lower utilization rates and a weaker product mix. Non-GAAP earnings per diluted share is expected to be between $0.15 and $0.17 per share, versus the company’s previous guidance of $0.46 to $0.58. The non-GAAP EPS number includes the negative impact of $0.07 in non-GAAP-related tax expenses. Super Micro’s board has authorized a buyback program of up to $100 million to lessen some of the negative impact. A total of 20 funds were long Super Micro Computer, Inc. (NASDAQ:SMCI) at the end of the first quarter, up by 13 funds from the previous quarter.

DragonWave Up 

Nano-cap DragonWave, Inc. (USA) (NASDAQ:DRWI) is a beneficiary of technical trading and has inched up by over 2% on light volume, as traders are bidding higher on no apparent fundamental news. DragonWave shares rose by 12% yesterday, and the stock has increased over 30% in recent days. Evidently some traders are bidding in hopes of catching some of the stock’s upward momentum. According to our data, Jim Simons’ Renaissance Technologies reported a stake of 49,168 shares in DragonWave, Inc. (USA) (NASDAQ:DRWI) as of the end of March. As with all nano-caps, investors should use due-diligence when buying or selling.

Energy in the Spotlight

Traders are watching Cobalt International Energy, Inc. (NYSE:CIE) and other energy E&Ps today due to the upcoming API report this evening and Wednesday’s EIA inventory release. If inventories fall faster than expectations, crude prices could rally, especially given the commodity’s retracement in recent weeks. At the end of March, 25 investors tracked by Insider Monkey had a bullish position in Cobalt International Energy, Inc. (NYSE:CIE), up by two funds from the previous quarter.

Disclosure: None