Caleres Inc (CAL) Making Big Gains Despite Missing Estimates

Caleres Inc (NYSE:CAL) is trending after it reported its first quarter financial results yesterday. For the quarter, Caleres earned $0.41 per share on sales of $584.7 million, missing estimates of $0.43 per share in earnings and revenue of a little over $610 million. Sales fell by 2.9% year-over-year due to the planned reduction of the company’s Brand Portfolio sales, while gross margin inched up 111 basis points to 42.4% due to the company’s exit from some lower margin categories. Famous Footwear same-store sales rose by 1%. Management expects full year revenue of $2.60 billion-to-$2.63 billion, and EPS of $2.00-to-$2.10 per share. Despite the soft first quarter, analysts at BB&T capital upgraded the stock to ‘Buy’ from ‘Hold’ and raised their price target to $26 per share following the earnings release, citing meaningful share repurchases, continued athletic expansion, and progress in supply chain initiatives. Shares have Caleres have jumped by 15% this morning.

How do you pick the next stock to invest in? One way would be to spend hours of research browsing through thousands of publicly traded companies. However, an easier way is to look at the stocks that smart money investors are collectively bullish on. Hedge funds and other institutional investors usually invest large amounts of capital and have to conduct due diligence while choosing their next pick. They don’t always get it right, but, on average, their stock picks historically generated strong returns after adjusting for known risk factors (see the details here). With this in mind, let’s take a look at the recent hedge fund activity surrounding Caleres Inc (NYSE:CAL).

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Heading into the second quarter of 2016, a total of 15 of the hedge funds tracked by Insider Monkey were long this stock, a 21% drop from one quarter earlier. Those funds held $42.10 million worth of Caleres Inc’s shares, amounting to a modest 3.40% of its outstanding shares.

When looking at the institutional investors followed by Insider Monkey, Renaissance Technologies, founded by Jim Simons, holds the biggest position in Caleres Inc (NYSE:CAL). Renaissance Technologies has a $12.2 million position in the stock, comprising less than 0.1% of its 13F portfolio. The second most bullish fund manager is Millennium Management, managed by Israel Englander, which holds a $7.4 million position; less than 0.1% of its 13F portfolio is allocated to the stock. Remaining hedge funds and institutional investors that hold long positions include D E Shaw, Paul Marshall and Ian Wace’s Marshall Wace LLP, and Cliff Asness’ AQR Capital Management.

Since Caleres Inc (NYSE:CAL) has witnessed bearish sentiment from hedge fund managers, it’s easy to see that there exists a select few hedgies who sold off their full holdings heading into Q2. Interestingly, Dmitry Balyasny’s Balyasny Asset Management cut the biggest position of the “upper crust” of funds tracked by Insider Monkey, valued at close to $2.2 million in stock, while John Overdeck and David Siegel’s Two Sigma Advisors was right behind this move, as the fund said goodbye to about $0.9 million worth of shares. These transactions are important to note, as aggregate hedge fund interest dropped by 4 funds heading into Q2.

Disclosure: None