The apparel industry is worth roughly $1.2 trillion as of 2016. U.S. consumers spend a whopping $250 billion annually on apparel, which makes the industry an attractive sector for investment. However, recent earnings reports from the industry’s top players suggest that the segment is facing headwinds amid a slowdown in demand from U.S. and Chinese consumers.
In this article, we’ll look at the favorite apparel stocks of the hedge funds tracked by Insider Monkey and see how they’ve been trading those stocks in recent months.
Through extensive research, we have determined that the due diligence that these investors employ, as well as their long-term focus makes them perfect targets to emulate. However, the results of our analysis have also showed that the small-cap picks of these funds can generate much better returns, with the 15 most popular small-cap stocks beating the market by an average of 95 basis points per month (read more details here).
Under Armour Inc (NYSE:UA)
– Number of Hedge Funds With Long Positions (as of June 30): 31
– Aggregate Value of Hedge Funds’ Holdings (as of June 30): $573.87 million
A total of 31 hedge funds in our system owned stakes in Under Armour Inc (NYSE:UA) at the end of the second quarter, a big jump from 21 funds a quarter earlier. Last week, the Washington D.C-based sports clothing company said that its CEO Kevin A. Plank had entered into a pre-arranged stock trading plan to sell shares of the company over a period of nine months beginning this October, which could amount to up to 2.075 million shares being sold. Financial services firm Argus recently downgraded Under Armour, Inc. (NYSE: UA) to ‘Hold’ from ‘Buy’. The stock is down by over 6% so far this year.
Ralph Lauren Corp (NYSE:RL)
– Number of Hedge Funds With Long Positions (as of June 30): 32
– Aggregate Value of Hedge Funds’ Holdings (as of June 30): $738.5 million
749 hedge funds that we track filed 13F’s for the June quarter, 32 of which were long Ralph Lauren Corp (NYSE:RL) on June 30, owning about 9.90% of the company’s float in aggregate. The New York-based clothing and fashion company reported fiscal year 2017 first quarter EPS of $1.06 on $1.55 billion in revenue, crushing analysts’ estimates of $0.89 in EPS and $1.53 billion in revenue. Shares of Ralph Lauren are down by 7.93% so far this year. On August 31, the company declared a quarterly dividend of $0.50 per share, which equates to an annual dividend yield of 1.96%. Mason Hawkins’ Southeastern Asset Management owns 2.74 million shares of Ralph Lauren Corp (NYSE:RL) as of the end of June.
On the next page, we’ll uncover hedge funds’ three favorite apparel stocks.
PVH Corp (NYSE:PVH)
– Number of Hedge Funds Having With Positions (as of June 30): 33
– Aggregate Value of Hedge Funds’ Holdings (as of June 30): $1.07 billion
Of the funds tracked by Insider Monkey, 33 were long PVH Corp (NYSE:PVH) at the end of the second quarter, holding $1.07 billion worth of the company’s stock. PVH shares have gained over 46% this year, ranking it as one of the top performing apparel stocks. The company reported second quarter EPS of $1.47, firmly above the consensus analyst estimate of $1.29, though revenue of $1.93 billion narrowly missed the consensus estimate of $1.94 billion. For the full-year, PVH Corp (NYSE:PVH) expects to earn between $6.55 and $6.65 per share, above the consensus mark of $6.54 even at the low-end of its guidance range.
Coach Inc (NYSE:COH)
– Number of Hedge Funds With Long Positions (as of June 30): 36
– Aggregate Value of Hedge Funds’ Holdings (as of June 30): $577.16 million
At the end of the second quarter, 36 hedge funds tracked by Insider Monkey had amassed approximately $577.16 million worth of Coach Inc (NYSE:COH)’s stock, down from 37 funds with $656.87 million in holdings on March 31. Jefferies Group reiterated its ‘Buy’ rating on Coach’s shares last week, whereas Piper Jaffray analyst Erinn Murphy recently reiterated her ‘Overweight’ rating after reviewing the company’s pre-Fall 2016 line. Baird also reiterated an ‘Outperform’ rating recently, citing the company’s improving margins. Coach Inc (NYSE:COH) shares have gained 15% year-to-date. Dmitry Balyasny’s Balyasny Asset Management owns 2.19 million shares of the company as of June 30.
Carter’s, Inc. (NYSE:CRI)
– Number of Hedge Funds With Long Positions (as of June 30): 38
– Aggregate Value of Hedge Funds’ Holdings (as of June 30): $1.32 billion
Carter’s, Inc. (NYSE:CRI) was in the portfolios of 38 of the hedge funds in our database at the end of the second quarter, down from 42 a quarter earlier. The apparel company earned $0.72 per share in the second quarter, beating the forecasts of $0.66 per share, while revenue of $639 million also surpassed expectations of $636.86 million. However, Carter’s, Inc. (NYSE:CRI) revised its full-year sales growth guidance to 5%-to-6% from its previously stated figure of 6%-to-7%, while cutting back on its adjusted diluted EPS growth guidance to 10% from 10%-to-12%. Last month, Monness, Crespi, Hardt & Co upgraded Carter’s to ‘Buy’ from ‘Neutral’ and has a price target of $118.00 on it, over $22 above the stock’s current price.