Why KLA-Tencor, Lam Research, JD.Com And More Are Trending

With crude futures nearing monthly highs and the broader markets steady, fear is low on Wall Street. Gold prices have fallen below $1,300 per ounce and the VIX is hovering just around 13.

In this article, we’ll analyze why KLA-Tencor Corp (NASDAQ:KLAC), Lam Research Corporation (NASDAQ:LRCX), Wal-Mart Stores, Inc. (NYSE:WMT), JD.Com Inc(ADR) (NASDAQ:JD), and Alphabet Inc (NASDAQ:GOOG) are making headlines in overnight and how that news is poised to impact the markets on Thursday morning. We’ll also uncover how the smart money was positioned in each stock at the end of the second quarter using the latest 13F filing data.

Through extensive research, we determined that imitating some of the picks of hedge funds and other institutional investors can help generate market-beating returns over the long run. The key is to focus on the small-cap picks of these investors, since they are usually less followed by the broader market and are less price-efficient. Our backtests that covered the period between 1999 and 2012, showed that following the 15 most popular small-caps among hedge funds can help a retail investor beat the market by an average of 95 basis points per month (see the details here).

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Although the semi-conductor space has seen substantial consolidation in recent quarters, KLA-Tencor Corp (NASDAQ:KLAC)‘s merger with Lam Research Corporation (NASDAQ:LRCX) won’t contribute to it. Due to opposition from the U.S. Department of Justice, the two companies have announced that they have agreed to terminate their proposed merger agreement. No termination fees are payable to either company. Perhaps to soften the blow, KLA-Tencor bumped up its quarterly dividend to $0.54 per share from the previous mark of $0.52.

Of the 749 hedge funds that we track which filed 13Fs for the June quarter, 30 were long KLA-Tencor Corp (NASDAQ:KLAC) on June 30, while 47 were shareholders of Lam Research Corporation (NASDAQ:LRCX).

Alphabet Inc (NASDAQ:GOOG) is in the spotlight after Recode reported that the search giant might not be bidding for Twitter Inc (NYSE:TWTR) at the current time, as was previously expected. Many traders thought that Alphabet would offer to buy Twitter given Facebook Inc (NASDAQ:FB)’s threat to the company’s cash-cow Google unit in the long run. By buying Twitter, Alphabet would be stronger in the social media realm and better able to defend itself in the event that Facebook chooses to aggressively enter the search arena. By potentially avoiding a bid, Alphabet is showing more financial discipline, which some investors are applauding. On the other hand, shares of Twitter have crumbled by over 9% in extended trading on the news. Andreas Halvorsen‘s Viking Global trimmed its holding in Alphabet Inc (NASDAQ:GOOG)’s class A shares by 13% during the second quarter, to just under 1.8 million shares on June 30. It also cut its holding in Alphabet’s class C shares by 20% during the period to 841,255 shares.

On the next page we’ll find out why Wal-Mart and JD.Com are in the spotlight.

Not long after it closed on its approximately $3.3 billion acquisition of Jet.com and bought a stake in Indian retailer Flipkart, Wal-Mart Stores, Inc. (NYSE:WMT) has expanded its e-commerce presence again, this time by raising its ownership stake in Chinese e-commerce company JD.Com Inc(ADR) (NASDAQ:JD). According to SEC filings, Wal-Mart now owns around 265 million shares in China’s second-largest e-commerce company, giving it ownership of 10.8% of the company’s class A shares. That compares to the 5.9% stake in JD.com’s class A shares that Wal-Mart owned as of June 20. JD.com’s shares have jumped by over 5% in after-hours trading on the news.

Wal-Mart spokesperson Jo Warner said:

“The stepped-up investment in JD has been part of our plan, as we continue to be a passive investor. We believe this strategic alliance will help us grow e-commerce even faster in China.”

58 funds tracked by Insider Monkey were bullish on Wal-Mart Stores, Inc. (NYSE:WMT) at the end of June, while 51 had long positions in JD.Com Inc(ADR) (NASDAQ:JD).

Disclosure: None