Through research reports released today, both J C Penney Company Inc (NYSE:JCP) and Twitter Inc (NYSE:TWTR) were upgraded to ‘Buy’ ratings by analysts, while United Technologies Corporation (NYSE:UTX) was downgraded to ‘Equal Weight’. Let’s take a look at the reasoning behind these shifts in analyst sentiment, and take a peek at how the smart money thinks about these stocks while we’re at it.
J C Penney Company Inc (NYSE:JCP)
Department store J C Penney Company Inc (NYSE:JCP) is currently trading up by 3.69% after being upgraded to ‘Buy’ from ‘Hold’ by analyst Paul Trussell of Deutsche Bank. The firm also upgraded the company’s price target to $12 from $10, representing a potential upside of 31.43% based on the stock’s opening price today. The latest upgrade comes a few days after the company’s Issuer Default Rating (IDR) was upgraded to a “B-” from a “CCC” by analysts at Fitch Ratings, citing the company’s turnaround in its performance over the past few quarters. With a new CEO and potential expansion opportunities, J C Penney is believed to be on the right track towards fully leveraging its growth potential. This year, the company’s stock price has shot up by 40.59%.
Let’s now have a quick look at hedge fund sentiment in this stock. At the end of the second quarter there were a total of 31 hedge funds out of the more than 700 that we track, that were invested in J C Penney Company Inc (NYSE:JCP), up from 29 at the beginning of the quarter. Their ownership in the stock shot up by 93.87% to close the quarter at $339.75 million. Renaissance Technologies, managed by Jim Simons, emerged as the biggest shareholder out of those funds, having raised its stake by 249% during the quarter to close it with 11.04 million shares worth $93.49 million.
We pay attention to hedge funds’ moves because our research has shown that hedge funds are extremely talented at picking stocks on the long side of their portfolios. It is true that hedge fund investors have been underperforming the market in recent years. However, this was mainly because hedge funds’ short stock picks lost a ton of money during the bull market that started in March 2009. Hedge fund investors also paid an arm and a leg for the services that they received. We have been tracking the performance of hedge funds’ 15 most popular small-cap stock picks in real time since the end of August 2012. These stocks have returned 118% since then and outperformed the S&P 500 Index by around 60 percentage points (see the details here). That’s why we believe it is important to pay attention to hedge fund sentiment; we also don’t like paying huge fees.
Twitter Inc (NYSE:TWTR)
Micro-blogging company Twitter Inc (NYSE:TWTR) has been upgraded to a ‘Buy’ rating from a ‘Neutral’ one by analyst Bob Peck of SunTrust Robinson Humphrey. In a research note issued this morning, the analyst cited that the company is likely to grow as a result of several partnerships it has recently rolled out. He also cited a more attractive valuation, as the social media company’s stock has slid beneath its IPO price this month and is down by 20.99% year-to-date. Shares of Twitter Inc are up by 5.77% today on the strength of the research note.
Out of the hedge funds we track, 47 were long in Twitter Inc, and held an aggregate of $701.39 million in shares, down sharply from 64 hedge funds with an aggregate of $1.75 billion at the beginning of the quarter. At the close of the second quarter, Daniel Benton‘s Andor Capital Management was long in Twitter Inc with 1.50 million shares worth $54.33 million.
How about insider activity? Well, there have been five open market buys and five sales over the past three months. The biggest insider purchase was made by Director and co-Founder Jack Dorsey in a transaction dated August 7, involving 31,627 shares.
United Technologies Corporation (NYSE:UTX)
High-end technology conglomerate United Technologies Corporation (NYSE:UTX) was also the subject of analyst coverage today. The stock was downgraded by analysts at Barclays to ‘Equal Weight’ from ‘Overweight’ and its price target trimmed to $100 from $120. While the price target has been cut, it still represents a potential upside of 9.64% over its opening price today. Poor growth potential and lower visibility going into 2017 have been cited as some of the reasons for the downgrade. The company’s share price is currently trading 1.03% lower for the day, pulling the stock down by 19.77% year-to-date.
There were 57 hedge funds with long positions in United Technologies on June 30, with their aggregate ownership totaling $2.94 billion in value. This represented a drop in the number of hedge funds, as there were 60 with aggregate holdings of $3.21 billion at the beginning of the quarter. At the close of the quarter, Fisher Asset Management, headed by billionaire Ken Fisher, emerged as the biggest shareholder of United Technologies Corporation out of the more than 700 hedge funds that we track. The fund was long in the stock with 8.21 million shares valued at $910.62 million.
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