Hedge Funds Are Buying 8 Retail Stocks as Consumer Sentiment Holds Steady

James Dennin, Kapitall: Consumer confidence held steady despite the weather, and institutional investors are snapping up retail stocks. 

Consumer confidence has  held up in February, according to the University of Michigan Consumer Sentiment index. Many analysts were expecting a small decline, in part due to atrocious weather.

People are less likely to spend in winter conditions – and investors assumed that consumers would be discouraged from shopping by the series of major storms that have dumped the most snow on the East coast in almost a decade. 

The fact that consumer confidence held steady, while perhaps not as exciting as if it had gone up, is a boon to the economy. Consumer sentiment doesn't just predict how likely people are going to be to spend, it's an important gauge as to whether typical consumers approve of the direction of the economy.

It's also possible that recent mergers and acquisitions are fueling excitement after a sluggish January.

Investing Ideas

If you think the market has been hard on the retail sector, it might be time to consider the stocks working in this space. Valuations are low, probabably due to investor excitement over e-commerce compared to brick and mortar stores. 

The oldest rule in the investing book is to buy low, sell high. So first we screened retail stocks using valuation metrics. We found 6 with a price to sales ratio below 1, which is considered low; and 4 with a price of profit (POP) below 15. 

Next we searched for companies that were experiencing spikes in institutional purchasing from firms like hedge funds or private equity funds. Our results included 8 stocks, with increases in institutional purchases in the most recent quarter of at least 5%. This indicates that institutional investors expect these retail stocks to outperform into the future

​Click on the interactive chart to view data over time. 

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1.ANN INC ( ANN):Operates as a specialty retailer of women's apparel, shoes, and accessories primarily in the United States. Market cap at $1.51B, most recent closing price at $33.53.

Net institutional purchases in the current quarter at 2.3M shares, which represents about 5.57% of the company's float of 41.29M shares.

Major Holders: Price (T.Rowe) Associates Inc at 7.8%.
 

 

2.Aeropostale, Inc. ( ARO):Designs, markets, and sells casual sportswear and other fashion merchandise under its own brands, principally targeted at customers 11 to 18 years old. Market cap at $517.24M, most recent closing price at $6.59.

Net institutional purchases in the current quarter at 4.0M shares, which represents about 7.68% of the company's float of 52.09M shares.

Major Holders: FMR, LLC at 14.11%.
 

 

3.Bebe Stores, Inc. ( BEBE):Engages in the design, development, and production of women's apparel and accessories. Market cap at $426.45M, most recent closing price at $5.39.

Net institutional purchases in the current quarter at 4.1M shares, which represents about 13.19% of the company's float of 31.08M shares.

Major Holders: Paradigm Capital Management at 4.53%.
 

 

4.Cache Inc. ( CACH):Operates as a mall-based specialty retailer of women's lifestyle sportswear and dresses in the United States. Market cap at $102.29M, most recent closing price at $4.85.

Net institutional purchases in the current quarter at 1.1M shares, which represents about 12.24% of the company's float of 8.99M shares. 

Major Holders: Price, Michael F. at 17.57%.

 

 

5.Chico's FAS Inc. ( CHS):Operates as a specialty retailer of casual-to-dressy clothing, intimates, complementary accessories, and other non-clothing gift items. Market cap at $2.66B, most recent closing price at $17.14.

Net institutional purchases in the current quarter at 7.2M shares, which represents about 5.08% of the company's float of 141.74M shares.

Major Holders: Blue Harbor Group at 5.8%. 
 

 

6.DSW Inc. ( DSW):Operates as a specialty branded footwear retailer in the U. Market cap at $3.38B, most recent closing price at $37.27.

Net institutional purchases in the current quarter at 4.4M shares, which represents about 5.82% of the company's float of 75.54M shares. 

Major Holders: Price (T.Rowe) Associates Inc at 13.39%
 

 

7.The Jones Group Inc. ( JNY):Engages in the design, marketing, and wholesale of apparel, footwear, and accessories in the United States and Canada. Market cap at $1.09B, most recent closing price at $14.96.

Net institutional purchases in the current quarter at 7.9M shares, which represents about 11.35% of the company's float of 69.59M shares.

Major Holders: Dimensional Fund Advisors LP at 8.45%.
 

 

8.The Children ( PLCE):Operates as a children's specialty apparel retailer in North America. Market cap at $1.2B, most recent closing price at $53.87.

Net institutional purchases in the current quarter at 1.9M shares, which represents about 8.85% of the company's float of 21.47M shares. 

Major Holders: Royce & Associates, LLC at 8.6%

 

 

( List compiled by James Dennin, a Kapitall Writer. Analyst ratings sourced from Zacks Investment Research, institutional data sourced from Fidelity. All other data sourced from Finviz.)

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