Fashion House Kate Spade (KATE) In The Trenches Amid Buyout Frets

American fashion house Kate Spade & Co. (NYSE:KATE) sunk by 15.24% to $19.33 in midday trading, on April 4, after asking more time to consider its takeover by Coach.

According to a CNBC report, the move allowed for fret on investors’ side who may think Kate is bidding time due to lower than expected deal offers. In the same report, anonymous sources told CNBC that Kate might close the deal by a lower amount than its current trading price.

Traders are selling their shares as Kate Spade & Co. (KATE) saw more than 4 million shares traded as of 11 a.m. It should be noted that Kate was trading at around $15 before talks of a buyout was in place, and while analysts were bullish at that time, sentiment may not be as positive today.

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What Does The Smart Money Sentiment Say?

Out of 742 hedge funds that we track at Insider Monkey, 31  funds kept their trust in Kate with a combined holdings of $4.6 million as of the end of the third quarter of 2016, compared to only 29 hedge funds with a combined holdings of $5.4 million in the fourth quarter of the same year.

At Insider Monkey, we’ve developed an investment strategy that has delivered market-beating returns over the past 12 months. Our strategy identifies the 100 best-performing funds of the previous quarter from among the collection of 700+ successful funds that we track in our database, which we accomplish using our returns methodology. We then study the portfolios of those 100 funds using the latest 13F data to uncover the 30 most popular mid-cap stocks (market caps of between $1 billion and $10 billion) among them to hold until the next filing period. This strategy delivered 39.7% gains over the past 12 months and outperformed the 24.1% gain enjoyed by the S&P 500 ETFs. Our enhanced small-cap hedge fund strategy returned more than 45% over the last 12 months and outperformed SPY by more than 30 percentage points over the last 4.5 years (see details here).

The Bottom Line

Traders are selling their shares of Kate Spade & Co. (NYSE:KATE) amid rumors of a buyout offer from Coach that is lower than expected. While shares of the company are still 5% higher than its price at the beginning of the year, Wall Street analysts are bearish. Interested in fashion? Here are 15 best states for fashion designers.

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