10 Stocks That Have Punished Hedge Funds This Year

Stock Market

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If you’re a hedge fund manager, 2013 has not been kind to you. A recent analysis conducted by Goldman Sachs shows that the typical hedge fund has returned just 4 percent this year through August 9 — pretty much anemic compared to the 20 percent return on the S&P 500 (including dividends). Last year wasn’t quite as bad — an 8 percent return for hedge funds compared to a 16 percent total return for the S&P 500 — but the time-tested message is clear: hedging produces underwhelming results during long market rallies.

Hedge funds typically try to compensate for possible losses on long positions by taking counter-balancing short positions. This strategy can produce superior results during periods of market uncertainty when equity valuations are volatile. However, thanks in no small part to the easy-money policy adopted by the U.S. Federal Reserves, stock valuations have pretty much done nothing but go up since the financial crisis. This has heaped rewards on those with long positions, and punished those with aggressive short positions, including many hedge funds.

The Goldman Sachs report shows that fewer than 5 percent of hedge funds have managed to outperform the S&P 500 this year to date, and 25 of them have actually posted losses. So what are some short positions that have gotten hedge funds in trouble?

1) Vistaprint N.V. (NASDAQ:VPRT)

Vistaprint is an online business-services company offering marketing products to small businesses around the world. At the beginning of August, the company reported that revenue increased 11.9 percent on the year to $280.1 million, beating the average analyst estimate of $273 million. Adjusted earnings increased 2.5 on the year to 41 cents per share, beating the average analyst estimate of 33 cents per share.

Year to date return: +57.78%

Shares shorted as a percent of float: 37.8

Vistaprint N.V. Stock Chart - VPRT Interactive Chart - Yahoo! Finance

2) j2 Global (NASDAQ:JCOM)

j2 Global is a digital media and business cloud services company that, despite a significant short float, has consistently beat expectations this year to date. Earlier in August, the company reported that revenue increased 58 percent on the year to $141.4 million, beating the average estimate of $131.4 million. Adjusted earnings increased 18.6 percent on the year to 83 cents per share, beating the average estimate of 79 cents per share.

Year to date return: +58.01%

Shares shorted as a percent of float: 35.2

j2 Global, Inc. Stock Chart - JCOM Interactive Chart - Yahoo! Finance

3) Pitney Bowes Inc. (NYSE:PBI)

Pitney Bowes is a software, hardware, and services communications technology company. The firm reported at the end of July that revenue decreased 7 percent on the year to $1.16 billion, missing the average analyst estimate of $1.19 billion. However, earnings increased 4 percent on the year to 52 cents per share, beating the average analyst estimate of 43 cents per share.

Year to date return: +59.31%

Shares shorted as a percent of float: 37.30

Pitney Bowes Inc. Common Stock Stock Chart - PBI Interactive Chart - Yahoo! Finance

4) Lexmark International Inc. (NYSE:LXK)

Lexmark International is a developer and manufacturer of printing and imaging technology. The company reported at the end of July that revenue decreased 3.1 percent to $890 million, beating the average analyst estimate of $858.96 million. Adjusted earnings increased 6.74 percent to 95 cents per share, beating the average analyst estimate of 88 cents.

Year to date return: +52.61%

Shares shorted as a percent of float: 21

Lexmark International, Inc. Com Stock Chart - LXK Interactive Chart - Yahoo! Finance

5) GameStop Corp. (NYSE:GME)

GameStop is a video game retailer. The company reported in August that revenue decreased 10.72 percent on the year to $1.38 billion, beating the average analyst estimate of $1.36 billion. Adjusted earnings decreased 43.75 percent on the year to 9 cents per share, beating the average analyst estimate of 4 cents per share.

Year to date return: +102.30%

Shares shorted as a percent of float: 25.4

Gamestop Corporation Common Sto Stock Chart - GME Interactive Chart - Yahoo! Finance

6) Herbalife Ltd. (NYSE:HLF)

Herbalife is a network marketing company that sells nutrition and sports supplements. The company recently reported that revenue increased 16.47 percent on the year to $1.12 billion, beating the average analyst estimate of $1.11 billion. Adjusted earnings increased 44.32 percent to $1.27 per share, beating the average analyst estimate of $1.07 per share.

Year to date return: +97.17%

Shares shorted as a percent of float: 44

Herbalife Ltd. Common Stock Stock Chart - HLF Interactive Chart - Yahoo! Finance

7) R.R. Donnelley & Sons Company (NASDAQ:RRD)

R.R. Donnelley & Sons is an integrated communications solutions company. The company reported at the end of July that revenue increased 1.72 percent on the year to $2.57 billion, beating the average analyst estimate of $2.5 billion. Adjusted earnings decreased 8.16 percent on the year to 45 cents per share, but still beat the average analyst estimate of 42 cents per share.

Year to date return: +96.52%

Shares shorted as a percent of float: 26.8

R.R. Donnelley & Sons Company Stock Chart - RRD Interactive Chart - Yahoo! Finance

8) Radian Group Inc. (NYSE:RDN)

Radian Group is a credit enhancement company. The company reported at the end of July that revenue increased 26 percent on the year to $243 million, beating the average analyst estimate of $231.6 million. Earnings came in at 5 cents per share, up from a loss of 38 cents per share in the year-ago period, and beating the average analyst estimate of 4 cents per share.

Year to date return: +108.87%

Shares shorted as a percent of float: 27.8

Radian Group Inc. Common Stock Stock Chart - RDN Interactive Chart - Yahoo! Finance

9) Questcor Pharmaceuticals, Inc. (NASDAQ:QCOR)

As the name would imply, Questcor is a biopharmaceutical company. At the end of July, the company reported that earnings increased 64.16 percent on the year to $184.6 million, beating the mean analyst estimate of $168.98 million. Adjusted earnings increased 62.32 percent on the year to $1.12 per share, beating the average analyst estimate of $1 per share.

Year to date return: 163.29%

Shares short as a percent of float: 34.9

Questcor Pharmaceuticals, Inc. Stock Chart - QCOR Interactive Chart - Yahoo! Finance

10) Zillow, Inc. (NASDAQ:Z)

Zillow is an online real-estate information marketplace. The company reported in August that revenue increased 69.3 percent on the year to $46.9 million, beating the average analyst estimate of $44.42 million. However, adjusted earnings came in at a catastrophic loss of 30 cents per share, well below analyst expectations.

Year to date return: +195.05%

Shares short as a percent of float: 42.7

Zillow, Inc. Stock Chart - Z Interactive Chart - Yahoo! Finance

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