Why Rigel Pharmaceuticals, American Airlines, Facebook, and More Are in the Spotlight

Although the U.S. weekly initial jobless claims came in 11,000 higher than expected for the week ended October 15, the markets are flat this morning as traders focus on earnings releases.

Among the stocks that traders are also watching today are Deutsche Bank AG (USA) (NYSE:DB), American Airlines Group Inc (NASDAQ:AAL), Rite Aid Corporation (NYSE:RAD), Rigel Pharmaceuticals, Inc. (NASDAQ:RIGL), and Facebook Inc (NASDAQ:FB). Let’s find out why each is in the spotlight and use the latest 13F data to determine hedge fund sentiment towards each stock.

Hedge fund sentiment is an important metric for assessing the long-term profitability. At Insider Monkey, we track over 750 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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Deutsche Bank AG (USA) (NYSE:DB) shares are 2.6% in the green after Manager Magazin reported that various big-league investors are willing to increase their stake in the bank. According to the article’s sources, the Qatari royal family, Abu Dhabi’s sovereign wealth funds, and an unnamed Chinese investor are all willing to participate in any capital raise and potentially increase their combined stake to around 25% of the company, from their current stake of 10%. Manager Magazin also reported that the bank is confident that it will not have to be pay anywhere near the $14 billion fine levied against it by the U.S Department of Justice. 15 funds in our system were long Deutsche Bank AG (USA) (NYSE:DB) at the end of the second quarter, up by five quarter-over-quarter.

American Airlines Group Inc (NASDAQ:AAL) shares are 1.7% in the red despite the airline reporting solid third quarter numbers. For the period, American Airlines earned $2.80 per share on sales of $10.59 billion, beating the Street’s estimates by an impressive $1.23 on the bottom-line and by $50 million on the top-line. Sales fell by 1.1% year-over-year as total revenue per available seat mile retreated by 2.2% and passenger load factor inched lower by 230 basis points to 83.3%. Shares of the company may be down due to guidance, as the company expects 2017 system capacity to increase by 1% year-over-year and for core CASM to rise by 2%, driven in part by increased labor costs. Of the 749 hedge funds that we track which filed 13Fs for the June quarter, 56 owned $1.35 billion worth of American Airlines Group Inc (NASDAQ:AAL) shares on June 30, which accounted for 8.30% of the float.

On the next page we’ll examine the news that has traders buzzing about Rite Aid, Rigel Pharmaceuticals, and Facebook.

Rite Aid Corporation (NYSE:RAD) has surged by 7% after Walgreens Boots Alliance Inc (NASDAQ:WBA) announced that the two companies have mutually agreed to extend the end date of their merger to January 27, 2017 from October 27, 2016. Walgreens Boots Alliance previously agreed to buy Rite Aid for $9 in cash per share. The deal hasn’t closed yet due to the need for the Department of Justice to give it the thumbs up. By delaying the merger end date, the two companies buy more time to satisfy the conditions that the Department of Justice may set on the deal. Walgreens’ management remains optimistic that the deal will go through. 50 funds owned shares of Rite Aid Corporation (NYSE:RAD) at the end of the second quarter, while 67 were long Walgreens.

Rigel Pharmaceuticals, Inc. (NASDAQ:RIGL) has retreated by 24% after the biotech announced disappointing data from the second of two late-stage, Phase 3 clinical trials investigating fostamatinib for the potential treatment of adults with certain types of immune thrombocytopenia. According to the company, the trial failed to achieve its primary endpoint, in contrast to the results of the first trial, which showed a statistically valid respond rate. The number of funds in our system with holdings in Rigel Pharmaceuticals, Inc. (NASDAQ:RIGL) rose by one during the second quarter to 19 at the end of June.

Facebook Inc (NASDAQ:FB) investors can sleep a little easier after Heather Bellini of Goldman Sachs said that her research showed “no material pushback” from ad buyers over the company’s previous video ad measurement fiasco, in which Facebook may have overstated the average viewing time of videos in previous years. According to her research, Facebook’s CPMs are likely in a range of negative 3% to up by 5% sequentially. Bellini expects EPS of $1.02 on sales of $7.05 billion for the company’s third quarter, the results of which will be released on November 2, and has a $162 price target on the stock. Ken Fisher‘s Fisher Asset Management lowered its stake in Facebook Inc (NASDAQ:FB) by 1% in the third quarter to 238,099 shares at the end of September.

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