After identifying the most popular stocks among hedge funds (see our epic top 10 list) according to their third quarter 13F filings, we have decided to break down this analysis to the apparel industry exclusively. On the whole, industry wide sales were up 3.8% in 2011 and should continue to grow as apparel retailers look to alternative distribution channels—including specialty shops, mass merchandisers and e-commerce. Our list includes the hundreds of hedge funds and prominent investors that are required by the SEC to disclose their public equity holdings quarterly. In descending order, we have outlined the most-loved apparel stocks based on the aggregate number of funds owning each.
Gildan Activewear Inc (NYSE:GIL) had 16 filers owning the stock, putting it as tied for eighth. This international apparel maker trades at an industry high P/E of 40x with only a 10% five-year expected earnings growth rate. We remain cautious on Gildan given the apparel company is already up almost 100% year to date.
Under Armour Inc (NYSE:UA) was another apparel company tied for 8th with 16 filers. Under Armour also trades on the high end when compared to its peers at 50x earnings. Although this apparel company has better growth prospects than Gildan—expected to grow earnings at over 20%, we would also be wary of this company.
Warnaco Group Inc (NYSE:WRC) is the final stock tied for eighth with a total of 16 filers at the end of 3Q. Warnaco is another apparel company trading with an outsized P/E at 40x and a relatively low earnings rate at 11%. The premium on Warnaco shares is driven by PVH’s – our fifth ranked stock on this list – plans to acquire the company.
V.F. Corporation (NYSE:VFC) came in seventh with 18 filers – after a net decrease of 6 filers. With a P/E of 17x, VF Corp is near the low-range of the industry and has managed to beat EPS estimates each of the last four quarters. We consider VF Corp a solid value play, trading at only 15x forward earnings and paying a 2.2% dividend yield.
Fifth & Pacific Companies (NYSE:FNP) had 20 filers owning the company at the end of 3Q to come in sixth. After changing its name earlier this year from Liz Claiborne the stock is down almost 10%. Fifth is the maker of high-end brands such as Juicy Couture and Kate Spade. We are cautious on this apparel company that appears to be a good value play at a 15x trailing P/E, because it trades at nearly 50x forward earnings. Billionaire Ken Fisher of Fisher Asset Management was the top fund owner of Fifth & Pacific at the end of 3Q (check out Ken Fisher’s newest picks here).