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This Metric Says You Are Smart to Sell Guess?, Inc. (GES) – DSW Inc. (DSW), Chico’s FAS, Inc. (CHS)

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Guess?, Inc. (NYSE:GES) has experienced a decrease in enthusiasm from smart money of late.

Guess?, Inc. (NYSE:GES)

If you’d ask most shareholders, hedge funds are viewed as unimportant, outdated investment vehicles of years past. While there are more than 8000 funds with their doors open today, we hone in on the leaders of this group, around 450 funds. It is estimated that this group controls most of the smart money’s total capital, and by keeping an eye on their top investments, we have spotted a few investment strategies that have historically outpaced the broader indices. Our small-cap hedge fund strategy outstripped the S&P 500 index by 18 percentage points annually 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 outperformed the S&P 500 index by 24 percentage points in 7 months (explore the details and some picks here).

Just as integral, positive insider trading activity is a second way to break down the investments you’re interested in. Just as you’d expect, there are plenty of reasons for an executive to get rid of shares of his or her company, but only one, very clear reason why they would buy. Several empirical studies have demonstrated the valuable potential of this strategy if investors understand what to do (learn more here).

Keeping this in mind, it’s important to take a gander at the recent action regarding Guess?, Inc. (NYSE:GES).

What have hedge funds been doing with Guess?, Inc. (NYSE:GES)?

Heading into 2013, a total of 9 of the hedge funds we track held long positions in this stock, a change of -31% from the third quarter. With hedgies’ capital changing hands, there exists a few noteworthy hedge fund managers who were increasing their holdings substantially.

Of the funds we track, Royce & Associates, managed by Chuck Royce, holds the most valuable position in Guess?, Inc. (NYSE:GES). Royce & Associates has a $101.7 million position in the stock, comprising 0.3% of its 13F portfolio. On Royce & Associates’s heels is AQR Capital Management, managed by Cliff Asness, which held a $27.4 million position; the fund has 0.1% of its 13F portfolio invested in the stock. Remaining hedgies with similar optimism include Ken Griffin’s Citadel Investment Group, and D. E. Shaw’s D E Shaw.

Because Guess?, Inc. (NYSE:GES) has witnessed declining sentiment from the smart money, it’s safe to say that there were a few hedgies that decided to sell off their entire stakes at the end of the year. It’s worth mentioning that Steven Cohen’s SAC Capital Advisors dropped the biggest stake of the “upper crust” of funds we track, totaling close to $5.7 million in call options. Israel Englander’s fund, Catapult Capital Management, also dropped its stock, about $0.6 million worth. These moves are important to note, as aggregate hedge fund interest dropped by 4 funds at the end of the year.

What have insiders been doing with Guess?, Inc. (NYSE:GES)?

Insider trading activity, especially when it’s bullish, is at its handiest when the company we’re looking at has seen transactions within the past half-year. Over the last six-month time frame, Guess?, Inc. (NYSE:GES) has seen zero unique insiders purchasing, and 1 insider sales (see the details of insider trades here).

Let’s check out hedge fund and insider activity in other stocks similar to Guess?, Inc. (NYSE:GES). These stocks are Wacoal Holdings Corporation (ADR) (NASDAQ:WACLY), DSW Inc. (NYSE:DSW), Chico’s FAS, Inc. (NYSE:CHS), The Men’s Wearhouse, Inc. (NYSE:MW), and The Buckle, Inc. (NYSE:BKE). This group of stocks are the members of the apparel stores industry and their market caps are similar to GES’s market cap.

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