PriceSmart, Inc. (NASDAQ:PSMT) announced its fiscal third quarter 2015 financial results today, missing Wall Streets’ earnings expectations. The retailer reported earnings per share of $0.70 against market estimates of $0.72, whereas its revenue came higher than the estimates. With net warehouse club sales of $675.3 million, PriceSmart, Inc. (NASDAQ:PSMT) achieved 13% year-over-year growth, as its revenue for the prior period was $579.9 million. Analysts were expecting net sales of $665.8 million for the quarter. It has been an excellent financial year for the retailer, as its net sales for the first nine months of 2015 have grown by 10.8% to $2.04 billion against sales of $1.84 billion for the first nine months of its fiscal year 2014. PriceSmart, Inc. (NASDAQ:PSMT) had 37 warehouse clubs active at the end of the quarter with its recent opening in Panama. The shares of the company have remained stable throughout the year, with 0.42% growth year-to-date.
The smart money had a bullish outlook on the retailer in the first quarter as nine hedge fund managers had $34.20 million worth of shares of the company at the end of the first quarter, a sizable increase from five investors holding $13.83 million in shares three months earlier. The large increase in holdings is even more notable when you factor in that shares of the company actually declined by nearly 7% during the quarter. Numerous investors clearly felt the entry point had been reached for PriceSmart on the dip and they were not wrong; shares are up by more than 12% since the end of the first quarter.
Why are we interested in the 13F filings of a select group of hedge funds? We use these filings to determine the top 15 small-cap stocks held by these elite funds based on 16 years of research that showed their top small-cap picks are much more profitable than both their large-cap stocks and the broader market as a whole. These small-cap stocks beat the S&P 500 Total Return Index by an average of nearly one percentage point per month in our backtests, which were conducted over the period of 1999 to 2012. Moreover, since the beginning of forward testing from August 2012, the strategy worked just as our research predicted, outperforming the market every year and returning 135% over the last 34 months, which is more than 80 percentage points higher than the returns of the S&P 500 ETF (SPY) (see more details).
We also track insider activity for important clues about the potential performance of companies. Insiders of PriceSmart, Inc. have executed a number of insider sales in 2015. Luis Jose Laparte, CEO and President at PriceSmart, made the largest insider sale during the year on April 21 when he sold 17,146 shares of the company.
Keeping this in mind, let’s take a look at the latest hedge fund action regarding PriceSmart, Inc. (NASDAQ:PSMT).
What does the smart money think about PriceSmart, Inc. (NASDAQ:PSMT)?
Heading into the second quarter, a total of nine of the hedge funds tracked by Insider Monkey were bullish in this stock, a change of 80% from one quarter earlier. With hedgies’ capital changing hands, there exists a select group of key hedge fund managers who were upping their holdings meaningfully.
Of the funds tracked by Insider Monkey, Steve Cohen’s Point72 Asset Management had the most valuable position in PriceSmart, Inc. (NASDAQ:PSMT), worth close to $12.7 million, with 150,000 shares comprising 0.1% of its total 13F portfolio. Coming in second was Renaissance Technologies, managed by Jim Simons, which held a $7.8 million position of 92,000 shares; the fund had less than 0.1% of its 13F portfolio invested in the stock. Some other peers that are bullish include George McCabe’s Portolan Capital Management, Ken Griffin’s Citadel Investment Group, and Peter Muller’s PDT Partners.
As one would reasonably expect, key hedge funds were leading the bulls’ herd. Portolan Capital Management opened a new $5.8 million position in the stock during the quarter. The other funds with brand new PriceSmart positions are PDT Partners, and Israel Englander’s Millennium Management.
Bullish hedge fund sentiment and growth in net sales during the fiscal third quarter are positive indicators of growth. Its shares are marginally up year-to-date and the firm reported 13% growth in EPS despite missing the markets’ expectations. All told, we recommend a buy of PriceSmart at this time.