The consumer discretionary sector represented about 53% of the equity portfolio investments of Alexander Mitchell‘s Scopus Asset Management as of the end of March according to the fund’s latest 13F filing. We decided to take a closer look at the fund’s top picks in this sector which included Signet Jewelers Ltd. (NYSE:SIG), Hanesbrands Inc. (NYSE:HBI), and Nike Inc (NYSE:NKE). Founded in 1998, the New York-based multi-billion dollar hedge fund uses extensive fundamental research and bottom-up financial analysis to hunt for companies selling at a discount to their intrinsic value. As is characteristic of Scopus, the turnover ratio for the quarter was particularly high, at 74.36%. The market value of its equity portfolio increased substantially to $5.02 billion from $3.83 billion at the end of the previous quarter. Apart from its strong investment in one sector, Scopus was otherwise fairly well-diversified heading into the second quarter, with its top ten holdings representing just 24.81% of the its total portfolio value.
Insider Monkey tracks hedge funds’ moves in order to identify actionable patterns and profit from them. Our research has shown that hedge funds’ large-cap stock picks historically delivered a monthly alpha of only six basis points, with these stocks underperforming the S&P 500 Total Return Index by an average of seven basis points per month between 1999 and 2012. These stocks were able to generate alpha because of their lower risk profile. On the other hand, the 15 most popular small-cap stocks among hedge funds outperformed the S&P 500 Index by an average of 95 basis points per month. These stocks were slightly riskier, so their monthly alpha was 80 basis points (read the details here). We believe investors will be better off by focusing on small-cap stocks rather than large-cap stocks.
Coming back to Scopus’ consumer discretionary picks, the top spot was occupied by Signet Jewelers Ltd. (NYSE:SIG) with the fund owning 1.02 million shares valued at $140.88 million. The fund’s largest equity holding was bulked up by 6% during the quarter and represented 2.81% of its portfolio’s value, down from 3.26% at the end of the previous quarter. This was because of the expansion of the portfolio through 91 new purchases and 46 additional purchases on existing holdings. Signet Jewelers Ltd. (NYSE:SIG) is up by nearly 1% year-to-date and 31.56% over the past calendar year. The $10.85 billion specialty retail jeweler acquired the 90-year old jeweler, Zale Corporation for $1.4 billion last year. Signet Jewelers Ltd. (NYSE:SIG) expects the synergies from the acquisition, which amount to somewhere between $150 million and $175 millio, to continue through the end of fiscal 2018. Keith Meister‘s Corvex Capital and Alan Fournier’s Pennant Capital Management are among the largest stockholders of Signet Jewelers Ltd. (NYSE:SIG).