Is Ralph Lauren Corp (NYSE:RL) a buy at these levels?
Now, according to many investors, hedge funds are perceived as delayed, old investment vehicles of a forgotten age. Although there are In excess of 8,000 hedge funds in operation today, Insider Monkey looks at the bigwigs of this group, around 525 funds. It is widely held that this group has its hands on most of the smart money's total capital, and by tracking their best stock picks, we've formulated a few investment strategies that have historically beaten the broader indices. Our small-cap hedge fund strategy beat the S&P 500 index by 18 percentage points annually for a decade in our back tests, and since we've began to sharing our picks with our subscribers at the end of August 2012, we have outperformed the S&P 500 index by 33 percentage points in 11 months (see all of our picks from August).
Just as useful, positive insider trading activity is a second way to analyze the marketplace. Just as you'd expect, there are lots of motivations for an insider to downsize shares of his or her company, but just one, very simple reason why they would initiate a purchase. Several empirical studies have demonstrated the market-beating potential of this strategy if investors know what to do (learn more here).
Now that that's out of the way, it's important to examine the newest info about Ralph Lauren Corp (NYSE:RL).
In preparation for the third quarter, a total of 31 of the hedge funds we track held long positions in this stock, a change of -9% from the first quarter. With the smart money's positions undergoing their usual ebb and flow, there exists a select group of noteworthy hedge fund managers who were boosting their stakes considerably.
Because Ralph Lauren Corp (NYSE:RL) has experienced a fall in interest from the top-tier hedge fund industry, we can see that there were a few fund managers who were dropping their full holdings at the end of the second quarter. Intriguingly, Bain Capital's Brookside Capital dropped the largest investment of the "upper crust" of funds we key on, worth close to $144.5 million in call options., and Alexander Mitchell of Scopus Asset Management was right behind this move, as the fund dropped about $38.1 million worth. These bearish behaviors are intriguing to say the least, as total hedge fund interest dropped by 3 funds at the end of the second quarter.
Insider buying made by high-level executives is best served when the company we're looking at has experienced transactions within the past six months. Over the latest 180-day time frame, Ralph Lauren Corp (NYSE:RL) has experienced zero unique insiders purchasing, and zero insider sales (see the details of insider trades here).
We'll go over the relationship between both of these indicators in other stocks similar to Ralph Lauren Corp (NYSE:RL). These stocks are Gildan Activewear Inc (USA) (NYSE:GIL), Under Armour Inc (NYSE:UA), Lululemon Athletica inc. (NASDAQ:LULU), PVH Corp (NYSE:PVH), and V.F. Corporation (NYSE:VFC). This group of stocks are the members of the textile - apparel clothing industry and their market caps are similar to RL's market cap.