Is Nordstrom, Inc. (NYSE:JWN) a buy?
To many investors, hedge funds are viewed as delayed, outdated financial tools of a period lost to current times. Although there are over 8,000 hedge funds trading currently, this site focuses on the masters of this club, around 525 funds. Analysts calculate that this group controls the lion's share of the smart money's total capital, and by watching their highest performing equity investments, we've revealed a few investment strategies that have historically outperformed the S&P 500. Our small-cap hedge fund strategy beat the S&P 500 index by 18 percentage points per year for a decade in our back tests, and since we've started sharing our picks with our subscribers at the end of August 2012, we have outpaced the S&P 500 index by 33 percentage points in 11 months (find a sample of our picks).
Equally as crucial, optimistic insider trading activity is another way to look at the financial markets. Obviously, there are a number of incentives for a bullish insider to drop shares of his or her company, but only one, very clear reason why they would buy. Many empirical studies have demonstrated the market-beating potential of this strategy if investors know where to look (learn more here).
Now that that's out of the way, we're going to discuss the newest info surrounding Nordstrom, Inc. (NYSE:JWN).
At Q2's end, a total of 22 of the hedge funds we track held long positions in this stock, a change of -8% from the previous quarter. With hedgies' positions undergoing their usual ebb and flow, there exists an "upper tier" of noteworthy hedge fund managers who were boosting their stakes considerably.
According to our 13F database, Citadel Investment Group, managed by Ken Griffin, holds the biggest position in Nordstrom, Inc. (NYSE:JWN). Citadel Investment Group has a $88.6 million position in the stock, comprising 0.2% of its 13F portfolio. Sitting at the No. 2 spot is Ariel Investments, managed by John W. Rogers, which held a $55.4 million position; 0.9% of its 13F portfolio is allocated to the company. Some other peers that are bullish include Jonathon Jacobson's Highfields Capital Management, and Sean Cullinan's Point State Capital.
Judging by the fact that Nordstrom, Inc. (NYSE:JWN) has faced a fall in interest from the smart money's best and brightest, it's safe to say that there was a specific group of funds that decided to sell off their full holdings heading into Q2. At the top of the heap, John Overdeck and David Siegel's Two Sigma Advisors dumped the biggest stake of all the hedgies we watch, valued at an estimated $36 million in stock, and Matthew Tewksbury of Stevens Capital Management was right behind this move, as the fund dumped about $11 million worth. These transactions are intriguing to say the least, as total hedge fund interest was cut by 2 funds heading into Q2.
Bullish insider trading is most useful when the company we're looking at has seen transactions within the past half-year. Over the latest half-year time period, Nordstrom, Inc. (NYSE:JWN) has experienced zero unique insiders buying, and 13 insider sales (see the details of insider trades here).
We'll check out the relationship between both of these indicators in other stocks similar to Nordstrom, Inc. (NYSE:JWN). These stocks are Urban Outfitters, Inc. (NASDAQ:URBN), The Gap Inc. (NYSE:GPS), Ross Stores, Inc. (NASDAQ:ROST), Limited Brands, Inc. (NYSE:LTD), and Michael Kors Holdings Ltd (NYSE:KORS). All of these stocks are in the apparel stores industry and their market caps are similar to JWN's market cap.