Why These 5 Stocks Are Pulling the Market Down on Tuesday

At a time when the S&P 500 is off by 1.5%, shares of Axovant Sciences Ltd (NYSE:AXON), Ferrari N.V. (NYSE:RACE), Waddell & Reed Financial, Inc. (NYSE:WDR), Pitney Bowes Inc. (NYSE:PBI), and Citigroup Inc (NYSE:C) are off by considerably more. We’ll look into why investors are selling these stocks off at a discount and also examine relevant hedge fund sentiment towards them.

At Insider Monkey, we track around 730 hedge funds and institutional investors. Through extensive backtests, we have determined that imitating some of the stocks that these investors are collectively bullish on can help retail investors generate double digits of alpha per year. The key is to focus on the small-cap picks of these funds, which are usually less followed by the broader market and allow for larger price inefficiencies (see more details about our small-cap strategy).

At the top of our list is Axovant Sciences Ltd (NYSE:AXON), whose stock has fallen by 25% in afternoon trading after Pfizer Inc. (NYSE:PFE) terminated the phase II testing of PF-05212377, based on poor efficiency. The program was being developed for Alzheimer’s Disease and raises new concerns about the drug, which is also being tested in a separate Phase III trial.

During the third quarter, Axovant Sciences Ltd (NYSE:AXON) registered a decrease in popularity among the funds that we track, with 15 investors holding long positions at the end of September, versus 21 funds at the end of June, though they still amassed a gargantuan 88.4% of the float.

Moving on, Ferrari N.V. (NYSE:RACE) shares are down by 12% today after the company reported disappointing fourth-quarter results. For its latest quarter, the exotic sports car company earned $0.28 per share on revenue of $744 million, missing estimates by $0.07 per share and $7.06 million, respectively. Total sales declined by 1% year-over-year. Shares of Ferrari are down by 27% since the company’s U.S IPO at the beginning of the year.

Waddell & Reed Financial, Inc. (NYSE:WDR) shares are down by around 15% today and touching a 52-week low. Analysts at Credit Suisse downgraded the company to ‘Underperform’ from ‘Neutral’ and also cut their price target on the stock to $28 per share from $33 per share, leading to the flight from the stock.

Among the funds we follow, 16 reported long positions in Waddell & Reed Financial, Inc. (NYSE:WDR) as of the end of September, down by three funds from a quarter earlier. Ken Fisher‘s Fisher Asset Management was the largest shareholder of the stock in our system, with 1.93 million shares valued at $67.04 million at the end of September.

We have two more stocks to get to, which we’ll do on the following page.

Pitney Bowes Inc. (NYSE:PBI) is another company that is hitting a 52-week low. Shares have fallen by more than 11% today after the company reported disappointing financial results for the fourth quarter of 2015. The company reported revenue of $936.95 million, while its profit declined to $0.48 per share from $0.51 a year earlier. Moreover, the results missed analysts’ estimates by $0.06 in EPS and $12.35 million in revenue. In addition to that, Pitney Bowes’ outlook for 2016 of $1.80-to-$2.00 in EPS came in lower than the Street’s expectations of $2.03 per share.

During the third quarter, Pitney Bowes Inc. (NYSE:PBI) also registered a decrease in popularity among the funds that we track, with 19 investors holding long positions at the end of September, versus 26 funds at the end of June. Among them, David Cohen and Harold Levy‘s Iridian Asset Management was the largest shareholder of Pitney Bowes Inc. (NYSE:PBI) in our system, with 14.88 million shares valued at $295.46 million at the end of September.

Last but not least, Citigroup Inc (NYSE:C) is in the red today. With no specific news at fault, the stock has plummeted by 4.3% and is now down by 21.3% on a year-to-date basis. The stock is probably being dragged down by the overall market, in which bank stocks (as well as energy stocks) are trending lower today. Other banks in the red include Bank of America Corp (NYSE:BAC) and JPMorgan Chase & Co. (NYSE:JPM).

121 funds in our system were long Citigroup at the end of the third quarter, down slightly from the end of the second quarter. Boykin Curry’s Eagle Capital Management reported holding a $1.21 billion position in the stock as of the end of September.

Disclosure: None