Why These Five Stocks Are Plummeting As Markets Rise?

U.S. stocks are up for a third consecutive trading session on Tuesday, largely driven by a marked surge in oil prices and a weakening Yen. However, as usual, a few stocks are moving in the opposite direction. This is the case for Solaredge Technologies Inc (NASDAQ:SEDG), LendingClub Corp (NYSE:LC), NewLink Genetics Corp (NASDAQ:NLNK), InvenSense Inc (NYSE:INVN) and MannKind Corporation (NASDAQ:MNKD), all of which are posting large losses on Tuesday trading. So, let’s take a look into the events behind these declines, and into how the hedge funds in our database feel about the above mentioned companies.

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).

Solaredge Technologies Tanks On Poor Guidance

Back to the stocks that interest us, let’s start with Solaredge Technologies Inc (NASDAQ:SEDG), a small-cap, solar energy equipment company that is down more than 21% in the early afternoon. After the market closed on Monday, the firm reported third fiscal quarter EPS of $0.51 on revenue of $125.2 million, beating the Street’s consensus by $0.10 and $1.95 million. However, guidance for the fourth quarter disappointed investors; the company’s management said it expects revenue in the $125 million to $134 million range, below expectations for $134.5 million.

As of the end of the fourth quarter of 2015, Solaredge Technologies Inc (NASDAQ:SEDG) counted 21 hedge fund supporters among those we track. Their total stakes, valued at more than $168 million by December 31, accounted for more than 15% of the company’s total shares.

LendingClub Continues To Tumble As Drama Unravels 

Next up is a company that has been all over the news: LendingClub Corp (NYSE:LC). The stock is down roughly 6% on Tuesday, continuing with the 34.34% decline seen on Monday, which was set in motion by the resignation of Founder, CEO and Chairman, Renaud Laplanche, and two other senior executives, in response to news that the company had misplaced the sale of $22 million in loans and re-dated another $3 million. But, the resignations did not only bring instability; they also brought investor scrutiny to the company’s fast growth, high risk business.

Among the funds that we track, 18 were long LendingClub Corp (NYSE:LC) by the end of 2015. One firm that is probably taking a big hit from this decline is Alexander Tamas’ VY Capital, which held almost 4.5 million shares of the company as of March 31, after increasing its exposure by 46% over the first quarter of 2016. VY Capital’s stake in LendingClub accounted for almost 30% of its first quarter equity portfolio.

NewLink Genetics’ Cancer Drug Fails To Meet Endpoint

Shares of NewLink Genetics Corp (NASDAQ:NLNK) are trading down by roughly 32.5% on Tuesday, driven by the announcement of disappointing results from its pancreatic cancer drug study. According to the data, the company’s immunotherapy (algenpantucel L) did not show any statistical difference when compared to the standard-of-care treatment – without being supplemented by algenpantucel L.

NewLink Genetics Corp (NASDAQ:NLNK) counted of 15 hedge fund supporters in our database by the end of 2015. Among them was Jean-Marie Eveillard’s First Eagle Investment Management, which declared holding 1.75 million shares of the company by March 31. This makes it the largest shareholder of record to date.

InvenSense Suffers From iPhone Shortfall

Another big decliner on Tuesday is InvenSense Inc (NYSE:INVN), a small-cap tech company, whose stock has lost more than 14% since the opening bell. The tumble seemed to be a response to the company reporting mixed results for the fourth quarter of fiscal 2016. Its EPS of $0.02 were in line with consensus, but the revenue of $79.53 million, which was (for the first time ever) 19.9% lower year-on-year, missed the estimates by $370,000, and guidance disappointed investors. Analysts have attributed the decline in sales to Apple Inc. (NASDAQ:AAPL)’s iPhone shortfall, which has been widely discussed recently, especially after the company’s sales miss a few days ago.

At the end of the fourth quarter, InvenSense Inc (NYSE:INVN) saw 20 funds from our database holding shares. One of the largest stakes was that of Joel Greenblatt’s Gotham Asset Management, which last disclosed ownership of 2.55 million shares, worth more than $26 million as of December 31.

MannKind Investors Take Double-Blow

Finally, there’s MannKind Corporation (NASDAQ:MNKD), whose stock has lost around 25% on the back of first-quarter earnings miss and an equity offering. On Monday afternoon, the company reported a net loss of $0.06 per share, missing the Street’s consensus by $0.01. However, the stock could have been affected due to the announcement of an equity offering for select institutional investors. The company said it will offer up to 48.54 million shares of stock and warrants to acquire stock, exercisable at $1.50 per warrant.

As of the end of the fourth quarter, 11 funds in our database reported long positions in MannKind Corporation (NASDAQ:MNKD). While hedge fund support was not overly high – but quite decent for a small cap, several funds became very bullish during the quarter, including D E Shaw, which reported a position of 1.06 million shares, up by more than 6,000% quarter-over-quarter.

 Disclosure: Javier Hasse holds no positions in any of the securities mentioned above.