Why These 5 Stocks Are Trending Ahead of Earnings Season Kickoff

U.S stocks are strong out of the gate this morning ahead of the first quarter earnings season that unofficially kicks off after the market close today. The positive sentiment is in contrast to what analysts are predicting will be a dismal earnings season, with consensus estimates predicting a 7% year-over-year decline. Amid this backdrop, Sony Corp (ADR) (NYSE:SNE), Hertz Global Holdings Inc (NYSE:HTZ), Avis Budget Group Inc. (NASDAQ:CAR), Viking Therapeutics Inc (NASDAQ:VKTX), and Insys Therapeutics Inc (NASDAQ:INSY) are among the stocks trending this morning. We’ll uncover why these stocks are making big morning moves and see what the investors in our database think about them.

Through our research we discovered that a portfolio of the 15 most popular small-cap picks of hedge funds beat the S&P 500 Total Return Index by nearly a percentage point per month on average between 1999 and 2012 (read the details here).

Let’s start with the combo of Hertz Global Holdings Inc (NYSE:HTZ) and Avis Budget Group Inc. (NASDAQ:CAR), which are both heading in the wrong direction this morning after Hertz was forced to lower its car rental revenue forecasts for 2016. Hertz cited pricing pressure due to vehicle oversupply as the reason why it expects a 2.5%-to-3.5% year-over-year car rental revenue decline for the first quarter, measured in terms of available car days. That quarterly performance led the company to lower its annual revenue guidance using the same measure to a range of flat-to-1.5% growth, down from the previous guidance of 1.5%-to-2.5% year-over-year growth. Shares of Hertz have tumbled by 6% as a result, while rival Avis Budget Group Inc. (NASDAQ:CAR)’s shares have taken a 4% tumble on the expectation that its results will be similarly impacted.

The news will come as a disappointment to some of the investors that we track, which collectively own large percentages of both companies. Hertz Global Holdings Inc (NYSE:HTZ) ranked as one of the top smid-cap stocks they were hoarding shares of, with 52 hedge funds owning 39.4% of the company’s shares. Likewise, Avis Budget Group Inc. (NASDAQ:CAR) ranked as one of their favorite small-cap stocks, with 33 investors holding 55.7% of its shares. Both stocks have struggled mightily in 2016, with their shares down by about 35% each.

Let’s move on to Sony Corp (ADR) (NYSE:SNE), the ADRs of which are trading up by over 4% this morning. The boost for the Japanese tech giant’s shares comes despite a report from Citi Research over the weekend which stated that Apple Inc. (NASDAQ:AAPL) will not deploy dual rear cameras in its upcoming phones to the extent that was expected, in an effort to reduce costs. Citi believes this will affect Sony greatly in the April-to-September period, as its long production lead times outpace the declining demand for its image sensors. Dual rear cameras are expected to be used in just 10%-to-20% of Apple’s next wave of iPhones, with previous reports suggesting that both single and dual rear camera models of the 5.5″ iPhone 7 Plus will be available, while only single rear cameras will be available for the 4.7″ iPhone 7.

In other Sony news, From Software’s Dark Souls 3, one of the more popular series on Sony’s video game consoles, releases tomorrow for the PlayStation 4. While the game is also available for PC and Xbox One, the first two games in the series were far more successful on Sony’s consoles, selling 3.34 million units on PS3 compared to just 1.71 million copies on the Xbox 360, according to data compiled by vgchartz. Sony Corp (ADR) (NYSE:SNE) was in the portfolios of 20 investors tracked by Insider Monkey as of December 31, with them owning $342 million worth of its ADRs. Mario Gabelli‘s GAMCO Investors held 5.99 million ADRs.

On the next page we’ll dig into the developments that have sent two pharmaceutical stocks hurtling in opposite directions this morning.

After gaining 35% on April 7 following an analyst upgrade from H.C. Wainwright, shares of Viking Therapeutics Inc (NASDAQ:VKTX) gave up all of those gains and more on April 8 after the company announced a public offering of 7.5 million units of common stock. The roller coaster ride continues for Viking Therapeutics’ shareholders today, as the stock is back in the good graces of investors following the release of positive data from the company’s Phase 1b trial on VK2809 in subjects with mild hypercholesterolemia.

The study, which involved 56 subjects, showed a statistically meaningful reduction in the LDL (bad) cholesterol levels of the subjects, of up to 41.2% after just 14 days of treatment. The treatment was also found to be safe and well-tolerated at the 5mg and 20mg doses studied. Shares of Viking Therapeutics Inc (NASDAQ:VKTX) have gained nearly 6% today on the news. Viking Therapeutics was not in the portfolios of any of the investors in our database as of December 31.

Lastly we come to Insys Therapeutics Inc (NASDAQ:INSY), which is down by 22% this morning after the company issued disappointing first quarter revenue estimates for Subsys, its fentanyl sublingual spray for cancer pain relief. Prescription volumes were down during the quarter, with the company predicting quarterly revenue of $61 million-to-$62 million, while analysts had predicted just over $86 million in revenue. The company believes that a national backlash against the overuse of opioid painkillers likely contributed to the lower volume of prescriptions during the quarter, but believes this decline is now stabilizing. There were reportedly 28,647 drug overdose deaths linked to opioids in the U.S in 2014, up by 200% since 2000.

20 funds in our database held about 25% of Insys Therapeutics Inc (NASDAQ:INSY) shares on December 31. Matt Sirovich and Jeremy Mindich’s Scopia Capital reported upping its stake in the stock to 7.43 million shares through a filing released on March 10, up from 5.82 million shares at the end of 2015.

Disclosure: None