According to research conducted by the International Council of Shopping Centers (ICSC), retailers appear to be on the verge of a stronger holiday season than the one they experienced last year. 80% of polled shoppers plan to spend the same amount of money or more this holiday season compared to last, while 90% of people plan to make holiday purchases, up from 82%.
ICSC is predicting 3.3% year-over-year growth in retail sales this holiday season, led by furniture and home furnishings retailers, which it predicts will enjoy 4.9% growth, well ahead of any other segment. As such, we’ve compiled a list of five home furnishings retailers that could make for great investment opportunities given their expected sales surge during the upcoming holidays. The retailers are ranked based on their popularity among the elite investment firms that we monitor.
5. Bassett Furniture Industries Inc. (NASDAQ:BSET)
– Elite Investors with Long Positions (as of June 30): 11
– Aggregate Value of Elite Investors’ Holdings (as of June 30): $40.15 Million
– Percentage of Shares Owned by Elite Investors (as of June 30): 13.10%
First up is Bassett Furniture Industries Inc. (NASDAQ:BSET), a 113-year-old company which operates more than 100 retail locations in the United States, Canada, and Puerto Rico. Bassett Furniture has been a strong performer on the stock market since the financial crisis, enjoying solid gains every year since 2009. 2015 is shaping up to the best year yet for the stock during this run, as it’s up by over 61% year-to-date. During a flat second quarter, three funds sold off their stakes in Bassett Furniture Industries Inc. (NASDAQ:BSET), while five funds opened new positions, though all five were relatively small positions. Richard Driehaus’ Driehaus Capital upped its stake by 53% to 114,180 shares during the second quarter, while Jim Simons’ Renaissance Technologies held the largest position in our database at 576,500 shares.
Professional investors like Driehaus spend considerable time and money conducting due diligence on each company they invest in, which makes them the perfect investors to emulate. However, we also know that the returns of hedge funds on the whole have not been good for several years, underperforming the market. We analyzed the historical stock picks of these investors and our research revealed that the small-cap picks of these funds performed far better than their large-cap picks, which is where most of their money is invested and why their performances as a whole have been poor. Why pay fees to invest in both the best and worst ideas of a particular hedge fund when you can simply mimic the best ideas of the best fund managers on your own? A portfolio consisting of the 15 most popular small-cap stock picks among the funds we track has returned 102% and beaten the market by more than 53 percentage points since the end of August 2012 year (see the details).
4. Ethan Allen Interiors Inc. (NYSE:ETH)
– Elite Investors with Long Positions (as of June 30): 13
– Aggregate Value of Elite Investors’ Holdings (as of June 30): $183.24 Million
– Percentage of Shares Owned by Elite Investors (as of June 30): 24.00%
Ethan Allen Interiors Inc. (NYSE:ETH) is a noteworthy stock due to the current involvement of activist investor Tom Sandell, who is pushing for change at the home furnishings retailer and interior design company. Sandell Asset Management will attempt to have a slate of nominees elected to the company’s board at its annual meeting scheduled for November 24, and recently scolded the current board for its refusal to engage in discussions with the fund. Sandell had sent a letter to the company prior to that, asserting that it was trading at a steep discount to its intrinsic value and that the company should endeavor to unlock this value by looking at spinning off its real estate assets into a real estate investment trust (a popular move by retailers lately), among other possible measures. Sandell holds 1.56 million shares of Ethan Allen Interiors Inc. (NYSE:ETH) according to its latest 13D filing, while mutual fund Royce & Associates owned 3.07 million shares as of June 30.
3. Kirkland’s, Inc. (NASDAQ:KIRK)
– Elite Investors with Long Positions (as of June 30): 15
– Aggregate Value of Elite Investors’ Holdings (as of June 30): $69.16 Million
– Percentage of Shares Owned by Elite Investors (as of June 30): 14.30%
A top pick of Nokomis Capital, Kirkland’s, Inc. (NASDAQ:KIRK) made a special cash dividend payment of $1.50 to shareholders on June 3, owing to the strength of its balance sheet. The company’s stock was enjoying a strong year until August 20, when its fiscal second quarter results for the period ended August 1 disappointed, leading to a drop of over 23% in the following two trading sessions. The home décor retailer, which operates 356 stores in 35 U.S states, had net sales of $115.3 million for the quarter, up by 11.4% year-over-year. Comparable store sales also rose by a solid 6.7%, a 3.1 percentage point rise year-over-year. For fiscal 2015 ended January 30, 2016, Kirkland’s, Inc. (NASDAQ:KIRK)’s anticipates year-over-year sales growth of 11%-to-12%.
The top two home furnishings stocks to consider ahead of the holidays can be found on the following page.