Dear Valued Visitor,

We have noticed that you are using an ad blocker software.

Although advertisements on the web pages may degrade your experience, our business certainly depends on them and we can only keep providing you high-quality research based articles as long as we can display ads on our pages.

To view this article, you can disable your ad blocker and refresh this page or simply login.

We only allow registered users to use ad blockers. You can sign up for free by clicking here or you can login if you are already a member.

Citi Loves These 4 Retail Stocks But Hedge Fund Metric Urges Caution

In a research note to clients published recently, Citigroup Inc (NYSE:C) initiated coverage on several stocks from the retail sector. Describing retail as a “stormy sector”, analyst Paul Lejuez argued in his note that even though macro conditions remain volatile and headlines “change by the hour”, the consumer ” is fine (not great, not weak) but importantly, there is enough uncertainty to play a role into how we think about certain subsectors and companies within our universe.” Considering that the undertone of the note was far from being overly bullish, it was surprising that out of the 20 stocks on which Citi initiated coverage, only two were rated as a ‘Sell’. Which is why we at Insider Monkey decided to take a closer look at Citi’s top four picks from the sector and compare their popularity among the hedge funds we track. Read further to know if smart money agrees with Citi’s analysis on these particular retail stocks.

Biggest Industries in America

We pay attention to hedge funds’ moves because our research has shown that hedge funds are extremely talented at picking stocks on the long side of their portfolios. It is true that hedge fund investors have been underperforming the market in recent years. However, this was mainly because hedge funds’ short stock picks lost a ton of money during the bull market that started in March 2009. Hedge fund investors also paid an arm and a leg for the services that they received. We have been tracking the performance of hedge funds’ 15 most popular small-cap stock picks in real time since the end of August 2012. These stocks have returned 102% since then and outperformed the S&P 500 Index by over 53 percentage points (see the details here). That’s why we believe it is important to pay attention to hedge fund sentiment; we also don’t like paying huge fees.

  1. Urban Outfitters, Inc. (NASDAQ:URBN)

– Investors with Long Positions (as of June 30): 28
– Aggregate Value of Investors’ Holdings (as of June 30): $266.82 Million

Although Citi thinks Urban Outfitters, Inc. (NASDAQ:URBN) is currently a ‘Buy’, and has a price target of $40 on the stock, which is 30% more than the stock’s current trading price, the popularity of the company among hedge funds doesn’t suggest that should be the case. During the second quarter, the number of funds we track that reported a stake in the company declined by one, while the aggregate value of their holdings in the company saw a drop of 34.18%, with those investors owning just 6.00% of the company’s shares. Though shares of Urban Outfitters, Inc. (NASDAQ:URBN) had a decent run during the first three months of the year, they have gradually declined since then and currently trade down by more than 10% year-to-date. The company was in the news for the wrong reasons this week after it asked employees at its home office to ‘volunteer’ during the weekend without being paid. Israel Englander‘s Millennium Management increased its stake in the company by almost 50-fold during the second quarter to nearly 1.28 million shares.

Follow Urban Outfitters Inc (NASDAQ:URBN)
Trade (NASDAQ:URBN) Now!

DOWNLOAD FREE REPORT: Warren Buffett's Best Stock Picks

Let Warren Buffett, George Soros, Steve Cohen, and Daniel Loeb WORK FOR YOU.

If you want to beat the low cost index funds by 19 percentage points per year, look no further than our monthly newsletter.In this free report you can find an in-depth analysis of the performance of Warren Buffett's entire historical stock picks. We uncovered Warren Buffett's Best Stock Picks and a way to for Buffett to improve his returns by more than 4 percentage points per year.

Bonus Biotech Stock Pick: You can also find a detailed bonus biotech stock pick that we expect to return more than 50% within 12 months.
Subscribe me to Insider Monkey's Free Daily Newsletter
This is a FREE report from Insider Monkey. Credit Card is NOT required.