According to database provider BarclayHedge, the hedge fund industry has $2.80 trillion in assets under management as of the end of the fourth quarter. The value of assets overseen by hedge funds has been gradually shrinking each year since 2011, which could be partly explained by these funds’ disappointing performance over the past several years. Although the hedge fund industry as a whole has not generated above-market returns over the past few years, one might anticipate the industry to outperform broader market benchmarks given the current “slow-growth” environment that is more conducive to hedged portfolios. Individual investors should monitor and track the moves of top hedge funds like those tracked by Insider Monkey, as part of a broader stock selection and analysis process, regardless of how these investment vehicles have performed overall, as their long stock picks tend to outperform the market. At the end of the day, better informed individuals tend to make better and more accurate investment decisions. Having said that, the following article will digest four SEC filings recently submitted by several hedge funds tracked by Insider Monkey.
At Insider Monkey, we track over 800 hedge funds and institutional investors. Through extensive backtests, we have determined that imitating some of the stocks that these investors are collectively bullish on can help retail investors generate double digits of alpha per year. The key is to focus on the small-cap picks of these funds, which are usually less followed by the broader market and allow for larger price inefficiencies (see more details about our small-cap strategy).
In a Schedule 13G filing, Ricky C. Sandler’s Eminence Capital LP reported owning 1.25 million shares of Restoration Hardware Holdings Inc. (NYSE:RH), which account for 3.1% of the company’s outstanding common stock. Eminence Capital did not own any shares of the luxury home furnishings retailer at the end of December 2015, as revealed by the fund’s 13F for the fourth quarter. At the end of February 2016, Restoration Hardware Holdings pre-announced its financial results for the fourth quarter of fiscal year 2015 that ended January 31, which has put significant pressure on the stock; the shares of Restoration Hardware are down by 60% over the past 52 weeks, after having dropped by a whopping 53% year-to-date.
Getting back to those financial results, the company reported preliminary adjusted diluted earnings per share of $0.99 on revenue of $647.21 million, while analysts’ estimates stood at diluted EPS of $1.35 on revenue of $707.73 million. Restoration Hardware Holdings Inc. (NYSE:RH) experienced some shipping delays related to the freshly-launched RH Modern collection during the fourth quarter, but the majority of demand/written orders will land on the company’s top-line figure during the first half of fiscal year 2016. Just recently, analysts at Raymond James upgraded the stock to ‘Strong Buy’ from ‘Outperform’, saying that the recent selloff was caused by macroeconomic uncertainty and firm-specific near-term challenges, and it would appear that Mr. Sandler agrees.
The shares of Restoration Hardware are currently trading at 10.39-times expected earnings, significantly below the forward P/E multiple of 16.70 for the Consumer Discretionary sector. The number of hedge funds in our system with stakes in Restoration dropped to 33 from 39 during the December quarter. Steven Cohen’s Point72 Asset Management owns 1.13 million shares of Restoration Hardware Holdings Inc. (NYSE:RH) as of December 31.
The next pages of this article discuss three other SEC filings submitted by several hedge fund vehicles monitored by our team.