The markets have quietly taken off after opening flat in the first hours of trading, but have inched down in the afternoon dragged by a decline in oil prices.
Nevertheless, several stocks, including Restoration Hardware Holdings Inc (NYSE:RH), Williams-Sonoma, Inc. (NYSE:WSM), Stone Energy Corporation (NYSE:SGY), Pier 1 Imports Inc (NYSE:PIR), and Transocean LTD (NYSE:RIG), are gaining ground today. Let’s find out why traders are buying and see what the funds from our database think about these companies.
Through extensive research, we determined that imitating some of the picks of hedge funds and other institutional investors can help generate market-beating returns over the long run. The key is to focus on the small-cap picks of these investors, since they are usually less followed by the broader market and are less price-efficient. Our backtests that covered the period between 1999 and 2012, showed that following the 15 most popular small-caps among hedge funds can help a retail investor beat the market by an average of 95 basis points per month (see the details here).
Restoration Hardware Surges On Buyout Speculation
Restoration Hardware Holdings Inc (NYSE:RH) shares have advanced by nearly 8% after analysts at BB&T said Williams-Sonoma, Inc. (NYSE:WSM) could acquire the company for $50 per share. Although that’s almost twice Restoration Hardware’s current price, the deal would still be accretive to Williams-Sonoma’s earnings by 16% and 25% respectively for fiscal year 2017 and 2018. Shares of Restoration Hardware have plunged by 67% year-to-date due to a string of earnings misses and extremely soft guidance. For the full year, Restoration Hardware expects EPS of $0.28-$0.33 versus the average analyst estimate of $0.80 per share. It is unclear whether Restoration management can turn around the ship without the stock falling further. A buyout could be the company’s best option if available and if the negative earnings trend doesn’t reverse. Among the funds we track, 38 funds owned $301.24 million of Restoration Hardware Holdings Inc (NYSE:RH), which accounted for 17.80% of the float on March 31, versus 33 funds and $1.01 billion a quarter earlier. A total of 31 funds from our database had a long position in Williams-Sonoma, Inc. (NYSE:WSM) at the end of March, up by 10 funds from the previous quarter.
On the next page, we examine Stone Energy Corporation, Pier 1 Imports, and Transocean LTD.