All three indexes are in the green on Wednesday as traders anticipate the Federal Reserve to keep interest rates steady during today’s FOMC meeting. Among the stocks in the spotlight today are Wal-Mart Stores, Inc. (NYSE:WMT), Co (NYSE:PG), Abercrombie & Fitch Co. (NYSE:ANF), salesforce.com, inc. (NYSE:CRM), and United States Steel Corporation (NYSE:X). Let’s uncover the reasons why investors are buzzing about these stocks today and see the hedge fund sentiment towards them.
Hedge fund sentiment is an important metric for assessing the long-term profitability. At Insider Monkey, we track over 700 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).
A Wall Street Journal Article Shines a Light on Wal-Mart and P&G’s Relationship
Wal-Mart Stores, Inc. (NYSE:WMT) and Procter & Gamble Co (NYSE:PG) are in the spotlight after the Wall Street Journal published an article entitled, ‘Wal-Mart and P&G: A $10 Billion Marriage Under Strain’. In the article, the Journal notes that Wal-Mart is making increasingly disadvantageous moves against P&G, including featuring a European competitor next to P&G’s Tide detergent, assigning less shelf space to Proctor’s brands, selling more of its private label brands, and pressuring P&G to cut prices. Given that Wal-Mart and P&G have long had a synergistic relationship, Wal-Mart’s moves are a bad sign for P&G, which generated roughly $10 billion in revenue at Wal-Mart stores last year. If the retailer does not change its policies, P&G may have to spend more on advertising to maintain its revenues and its future growth might not be as healthy as analyst are expecting now. Wal-Mart’s moves also illustrate how the company is adjusting to an increasingly competitive retail sector led by the emergence of Amazon.com, Inc. (NASDAQ:AMZN). Of the 766 funds in Insider Monkey’s database, 54 funds had a long position in Wal-Mart Stores, Inc. (NYSE:WMT) at the end of the first quarter, up by five from the previous quarter, while 59 top funds were long Procter & Gamble Co (NYSE:PG), an increase of seven funds over the quarter.
On the next page, we examine Abercrombie & Fitch, salesforce.com, and United States Steel Corporation.