Why Traders Are Buzzing About These Five Stocks on Friday

After several consecutive days of declining, the markets are calmer in the pre-market as sentiment in Britain for staying in the EU has improved. The three major indexes are only modestly in the red and crude futures are well in the green.

Among the stocks in the spotlight today are McDonald’s Corporation (NYSE:MCD), Albemarle Corporation (NYSE:ALB), FedEx Corporation (NYSE:FDX), Lifelock Inc (NYSE:LOCK), and E*TRADE Financial Corp (NASDAQ:ETFC). Let’s find out why each stock is buzzing and see what elite funds think of them.

Hedge fund sentiment is an important metric for assessing the long-term profitability. At Insider Monkey, we track over 760 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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McDonald’s Corporation (NYSE:MCD)

According to the New York Post, McDonald’s Corporation (NYSE:MCD) is outsourcing some jobs to India as part of its $500 million cost reduction program. One of the first cuts in the effort will be closing a regional office in Columbus. Overall, the positions of 70 workers at the facility could be outsourced to an Indian firm. The cost reduction program should help increase McDonald’s return on capital. A total of 83 funds from our database owned shares of McDonald’s Corporation (NYSE:MCD) at the end of March.

Albemarle to Sell Unit

Global specialty chemical company Albemarle Corporation (NYSE:ALB) is selling its Chemetall Surface Treatment business to BASF for around $3.2 Billion. The deal represents a last twelve month EBITDA multiple of 15.3x as of the end of March and continues Albemarie’s commitment to maximize shareholder value by reducing leverage, return capital to shareholders, and investing in high priority businesses. At the end of March, 28 funds tracked by us had a long position in Albemarle Corporation (NYSE:ALB) at the end of the first quarter.

On the next page, we examine FedEx Corporation, Lifelock Inc, and E*TRADE Financial Corp.

FedEx Settles Lawsuit

FedEx Corporation (NYSE:FDX) is in the spotlight today after it agreed to settle a lawsuit concerning the labor status of some of its former workers. According to the settlement, the delivery giant will pay $240 million to a combined 12,000 drivers in 20 states for classifying them as independent contractors when they were theoretically more than that. FedEx saved substantial amounts of money by avoiding paying pensions, health care costs, taxes, and other expenses due to the classification. Among the funds we track, 45 funds owned $3.44 billion of FedEx Corporation (NYSE:FDX) and accounted for 7.90% of the float on March 31, versus 47 funds and $3.31 billion respectively on December 31.

Lifelock Gets a Major Investor

Lifelock Inc (NYSE:LOCK) shares are trending today after activist Paul Singer‘s Elliott Management took an 8.8% stake in the company. According to the 13D filing with the Securities and Exchange Commission, the elite fund believes the stock is undervalued and the fund has initiated talks with management and the board over opportunities to increase shareholder value. A total of 16 funds tracked by us had a bullish position in Lifelock Inc (NYSE:LOCK) at the end of March, down by 15 funds from the previous quarter.

Interest Rates Lower for Longer  

E*TRADE Financial Corp (NASDAQ:ETFC) is trending today after St. Louis Fed President Jim Bullard said that few rate hikes are needed given the new normal of the economy. For the next two years, Bullard sees real GDP growth of 2% a year, unemployment at 4.7%, and relatively tame inflation. Those numbers indicate that the Federal Funds rate doesn’t need to be higher than 0.63% over that time period. Bullard’s comments mean that E*TRADE bulls may have to wait a bit longer for their thesis that rising rates will increase profits at the broker to play out. The number of funds tracked by us with holdings in E*TRADE Financial Corp (NASDAQ:ETFC) fell by nine quarter-over-quarter to 39 at the end of March.

Disclosure: none