Why These Stocks Are Leading Today’s Losers

The U.S. stocks managed to regain the ground lost during the first hours of trading today and have turned positive around noon. There are, however, some stocks that have not followed suit and are still in red territory. Shares of J C Penney Company Inc (NYSE:JCP), Macy’s, Inc. (NYSE:M), Horizon Pharma PLC (NASDAQ:HZNP) and Oracle Corporation (NYSE:ORCL) have registered a significant decline today for various reasons. Let’s find out what they are and also how hedge funds like these companies.

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Shares of J C Penney Company Inc (NYSE:JCP) are trending slightly lower today after the troubled retailer has announced some preliminary third quarter results and the settlement of a lawsuit. The company said it registered a 6.4% increase in comparable-store sales, which is above analyst estimates of 5.7% growth. J C Penney also announced that third-quarter gross margins and earnings have exceeded their own expectations. The company is set to release the full financial report on Friday, November 13, before market open. J C Penney also announced the a settlement of a class action lawsuit on alleged false advertising, agreeing to pay up to $50 million to settle claims.

At the end of the second quarter, 31 hedge funds held a long position in J C Penney Company Inc (NYSE:JCP) and together had control over 13% of the company’s common stock. Hedge fund guru Jim Simons was among those betting for a J C Penney turnaround, as his fund Renaissance Technologies reported a 249% surge in its holding to more than 11 million shares. Billionaire Ken Griffin is also bullish, having upped his stake by 49% to 3.16 million shares at the end of June.

Macy’s, Inc. (NYSE:M) shares fell by as much as 14% today, as sales continue to slump. Same store sales fell by 3.9% during the quarter ended October 31, 2015, while total sales fell 5.2% to $5.87 billion, missing analyst expectations of $6.09 billion. The company also reported earnings of $0.36 per share, down from $0.61 per share posted a year ago, while analysts had lined up a profit of $0.54 per share. These disappointing results have prompted management to revise its forward guidance, lowering full year profit estimates to a range of $4.20 to $4.30 per share, down from previous projections of $4.70 to $4.80 per share.

The popularity of Macy’s, Inc. (NYSE:M) among the funds we track registered a boost during the second quarter, with 61 funds having reported ownership of the stock, up from 55 at the end of the first quarter, holding 9.7% of its outstanding stock. Activist Jeffrey Smith and Ken Griffin have the same feeling towards Macy’s, having both initiated positions during the second quarter. At the end of June, Smith’s Starboard Value reported ownership of 2.92 million shares, while Citadel Investment Group held some 3.2 million shares.

Investors are driving Horizon Pharma PLC (NASDAQ:HZNP) lower today, after news emerged that the biopharmaceutical company is being sued by Express Scripts Holding Company (NASDAQ:ESRX) for some $140 million. The largest manager of prescription drug plans in the United States, Express Scripts has removed mail-order pharmacy Linden Care from its network, after it failed to fulfill contractual obligations and distributed mainly medications from Horizon. The latter denied any wrongdoing and has hit back at Express Scripts accusing the company of a conflict of interest, since it operates one of the largest mail-order pharmacies in the U.S. Shares of Horizon have plummeted during the first hours of trading today and are currently down by more than 15%.

With 12.2 million shares of Horizon Pharma PLC (NASDAQ:HZNP), James E. Flynn and Deerfield Management had the largest holding among the funds we track at the end of the second quarter. Kevin Kotler is also invested, but chose to reduce exposure to the company, dumping nearly a third of his stake and leaving his fund, Broadfin Capital, with 4.81 million shares. In general, Horizon Pharma is not very popular among the funds we follow, as just 6% of the funds held this stock at the end of June and had control over 34% of outstanding shares.

Shares of Oracle Corporation (NYSE:ORCL) are slightly lower this morning after the stock was downgraded by analysts at Morgan Stanley. In a note to investors, Morgan Stanley assigned an ‘Equal Weight’ rating, down from ‘Overweight’, but has maintained its price target of $45 per share. The firm said Oracle failed to generate revenue growth from its cloud bookings business and is unsure about the impact Oracle’s migration to the cloud would have on its bottom line in the near future.

The software giant is among the hedge funds’ top stock picks for the second quarter, although the 58 funds invested in the company held just 4.5% of common stock. During the second quarter, Boykin Curry reduced his investment in Oracle Corporation (NYSE:ORCL) by 6% to some 42.2 million shares, while Robert Rodriguez and Steven Romick did the opposite. Their fund, First Pacific Advisors, reported a 7% increase to 20.2 million shares in its latest 13F filing.

Disclosure: none.