Founded in 1985, Buckingham Capital Management is a long/short hedge fund run by David Keidan. The fund employs two main investment strategies: a broader strategy that includes investing in stocks across a number of sectors, and a strategy that focuses exclusively on retail, apparel, and footwear stocks. The firm oversees approximately $1.3 billion in assets under management and its public equity portfolio was valued at $881 million at the end of the first quarter. Insider Monkey calculates a fund’s long stock picking skill by looking at the weighted average returns of its long positions in companies with a market cap of at least $1 billion, based on the size of those positions at the beginning of each quarter. Under these assumptions, Buckingham Capital’s 63 qualifying long stock picks registered a gain of 5.2% for the first quarter, ranking it in the upper tier of hedge funds. Since the fund’s portfolio has great exposure to apparel stocks, we’ll take a look at its top-5 positions in this sector and heading into the second quarter.
We believe that imitating hedge funds and other large institutional investors can be helpful in identifying stocks capable of outperforming the broader market. Through extensive research that covered portfolios of several hundred large investors between 1999 and 2012, we determined that following the small-cap stocks that large money managers are collectively bullish on, can generate monthly returns nearly 1.0 percentage points above the market (see more details here).
Buckingham Back on the Foot Locker Bandwagon
Buckingham Capital’s stake in Foot Locker, Inc. (NYSE:FL) was upped by 17% during the first quarter, to 393,472 shares valued at $25.4 million. Foot Locker also received a boost of confidence from the hedge fund community as a whole, as 35 of the funds followed by Insider Monkey held a position in the company at the end of 2015, up from 25 registered a quarter earlier. Foot Locker, Inc. (NYSE:FL) has a market cap of $8.62 billion and pays an annual dividend of $1.02 per share, the equivalent of a 1.78% dividend yield. The stock is currently trading at a trailing Price-to-Earnings (P/E) ratio of 16.12, significantly lower than the industry average of 25.90, as reported by Yahoo! Finance. The company’s next earnings report is due on May 20 and market participants are looking for $1.39 in earnings per share and revenue of approximately $2.00 billion. Billionaire Ken Griffin is also bullish on Foot Locker, Inc. (NYSE:FL), with his fund Citadel Investment Group having reported a massive increase in its Foot Locker holding over the fourth quarter, to 2.75 million shares.
Is Hanesbrands Still a Buy?
Hanesbrands Inc. (NYSE:HBI) is another apparel stock that Mr. Keidan and his team are optimistic about. They boosted their investment in the company by 6% during the first quarter, to 938,521 shares worth approximately $26.6 million at the end of March. Hanesbrands Inc. (NYSE:HBI) recently posted first quarter results that topped analysts’ estimates. Revenue came in at $1.22 billion, in-line with the estimates, while adjusted earnings stood at $0.26 per share, above the consensus of $0.22 per share. Analysts at Credit Suisse recently reiterated their ‘Outperform’ rating for the stock and increased their price target on it to $39 per share from the previous target of $36 per share. 42 top hedge funds in our system reported a stake in Hanesbrands Inc. (NYSE:HBI) as of the end of December, up from 32 a quarter prior to that. Together those funds controlled approximately 12% of the company’s common stock. Among the funds followed by Insider Monkey, John Shapiro‘s Chieftain Capital held the largest stake in Hanesbrands at the end of 2015, amounting to 9.98 million shares, up by 9% from the end of September.
Turn the page to read about Buckingham Capital Management’s top three equity positions.