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Barclays’ Top Retail Picks: Are They Good Stocks To Buy? Hanesbrands Inc. (HBI), MGM Resorts International (MGM) and More

Barclays’ Americas Top Picks List is regarded as a trustworthy and thoroughly researched report among investors. The analyst firm has included Hanesbrands Inc. (NYSE:HBI), MGM Resorts International (NYSE:MGM), and Panera Bread Co (NASDAQ:PNRA) in its latest list as the primary retail stocks with high upside potential.

Hanesbrands Inc. (NYSE:HBI) has gained a place in Barclays list because of its distinguished growth story and the analysis firm has put a price target of $38 for its stock. The apparel maker initiated margin expansion efforts, Innovate-to-Elevate, along with its merger and acquisition growth strategy. Barclays believes that these two factors could help the company achieve EPS growth of 20% in the longer run.

Hanesbrands Inc. (NYSE:HBI) executed 4-for-1 stock split in March 2015 under which, every existing shareowner of the company received three additional shares against every single share held as of record on Feb 9, 2015. Richard A. Noll, Chief Executive Officer and Chairman of Hanes, mentioned the shareholder value creation of the company. He said, “We have posted record results for sales, adjusted operating profit, and adjusted earnings per share the past two years and our guidance for 2015 would represent another year of record results.” Hanesbrands Inc. (NYSE:HBI) has paid $220 million in cash dividends since its first cash dividend announced in June 2013. The apparel manufacturer completed the acquisition of Knights Apparel, leading seller of collegiate logo apparel, on April 8, 2015 valuing Knights Apparel at $200 million.


The shares of Hanesbrands Inc. (NYSE:HBI) are up 18.49% in 2015 and are currently trading at $33.32. Smart Money is bullish over the stock of Hanesbrands Inc., as majority of the hedge fund managers tracked at Insider Monkey have raised their stake in the apparel manufacturer. However, the net invested amount slid slightly to $956.68 million from the previous quarter aggregate investments of $983.77 million. Among the 34 hedge fund managers holding positions in the company, John Shapiro of Chieftain Capital held a large position including 6.93 million shares for market value of $232.08 million.

Why are we interested in the 13F filings of a select group of hedge funds? We use these filings to determine the top 15 small-cap stocks held by these elite funds based on 16 years of research that showed their top small-cap picks are much more profitable than both their large-cap stocks and the broader market as a whole. These small-cap stocks beat the S&P 500 Total Return Index by an average of nearly one percentage point per month in our backtests, which were conducted over the period of 1999 to 2012. Moreover, since the beginning of forward testing from August 2012, the strategy worked just as our research predicted, outperforming the market every year and returning 135% over the last 34 months, which is more than 80 percentage points higher than the returns of the S&P 500 ETF (SPY) (see more details).

Barclays has declared MGM Resorts International (NYSE:MGM) as its top gaming stock for 2015. The analyst picked MGM Resorts because of the geographical diversity offered by the company, which could help the firm benefit from the improving trends in Las Vegas and gain near term value as soon as the Macau market headwinds disappear. A report from the Chinese authorities announcing ease in restrictions for local tourists to visit Macau has boosted the shares of MGM Resorts International (NYSE:MGM) by 3% recently . According to the new restrictions, travelers with a passport from mainland China will now be able to stay in Macau for seven days against previous limit of five days. Further, the travelers can visit the city twice a month instead of the previous restriction of two visits per 60 days. This announcement could give the necessary boost to the gaming operators in Macau helping them recoup for the slow growth throughout the year.

Another factor that could help boost the shareholder value in MGM Resorts International (NYSE:MGM) is the interest shown by the activist investor Keith Meister. Corvex Capital reported new position in the gaming operator at the end of the first quarter of 2015 with 3.90 million shares valued at $81.99 million. Hedge fund sentiment is bullish for the shares of MGM Resorts as the company has received total investments of $1.76 billion from 58 hedge fund managers against previous quarter investments of $1.45 billion made by 45 hedge fund investors. James Dinan’s York Capital Management is among the primary shareholders of the company with reported ownership of 9.94 million shares valued at $209.09 million towards the end of the first quarter.

Panera Bread Co (NASDAQ:PNRA) is another name in the list of retail stock picks of Barclays primarily because of its Panera 2.0 turnaround initiative. At the core of Panera 2.0 is a consumer-facing model that is working towards operational enhancement and digital upgrades. Panera Bread Co (NASDAQ:PNRA) is trying to cut down its labor costs with digital ordering and the new changes in delivery system could help elevate sales. In theory, it would help customers skip ordering line and they can even make an online order for pickup. The CEO of Panera Bread Co, Ron Shaich, said, “Panera has far greater potential to both increase sales and reduce labor for many years to come.” Barclays is expecting that the shares of Panera Bread will outperform the market along with growth in EPS in the next 12 months. Smart Money has also shown a positive sentiment towards these changes, as 25 hedge fund managers invested $369.93 million at the end of the first quarter against previous quarter investments of $347.32 million from 21 hedge fund investors. Rob Citrone’s Discovery Capital Management held a major position in Panera Bread Co (NASDAQ:PNRA) with 431,458 shares valued at $69.03 million.

Disclosure: None

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