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Urban Outfitters, Inc. (URBN): Apex Capital Was Right Betting On Retailer; See Fund’s Other Top Picks

Urban Outfitters, Inc. (NASDAQ:URBN) is one of the stocks in the news today, being on of the top gaines in intraday trading. The stock jumped by over 11% on the back of strong financial results that the company reported today. Many investors have anticipated Urban Outfitters’ strong performance, but one of the funds that invested a considerable portion of its equity portfolio in the company is Sanford J. Colen‘s Apex Capital that owns 1.64 million shares of the company, the $57.48 million stake being the fourth-largest in the fund’s equity portfolio. Moreover, during the fourth quarter, the fund raised its stake in the company by 49%.

Urban Outfitters, Inc. (NASDAQ:URBN)

Urban Outfitters, Inc. (NASDAQ:URBN) is a specialty retailer that offers apparel and accessories under several brands such as Urban Outfitters, Anthropologie, Free People, Terrain and Bhldn. The company also has a wholesale division that designs and markets casual apparel for young women sold through department and specialty stores across the world. For the fourth quarter of fiscal 2015 (ended January, 2015), Urban Outfitters, Inc. (NASDAQ:URBN) posted record sales of $1.01 billion, up by 12% on the year, while the company’s earnings per diluted share went up to $0.60 from $0.59. For the full fiscal year, the company’s revenue also grew to $3.23 billion from $3.09 billion for the previous year, but EPS fell to $1.68 from $1.89. Therefore, with Urban Outfitters posting significant growth across all brands it owns, and taking into account the fact that the company’s sales have been growing for the last several years, the stock can grow even further.

As, it has been mentioned, some investors expected a strong performance from Urban Outfitters, Inc. (NASDAQ:URBN) and during the fourth quarter added the company to their equity portfolios or increased their positions. However, among the majority of funds that we track, the holdings in Urban Outfitters amass very small portions of the total equity portfolio value. For example, Steve Cohen‘s Point72 Asset Management and Alexander Mitchell’s Scopus Asset Management initiated stakes in the company, holding 1.40 million shares and 350,000 shares respectively, both positions accounting for around 0.30% of the equity portfolio value.

Let’s get back at Apex Capital, though. The fund has an equity portfolio valued at $1.43 billion, which is primarily iuvested in the services sector, the majority of top picks being services companies. The fund also has some exposure to technology and healthcare stocks. Mr. Colen can be considered an activist investor, since last year the investor disclosed entering into discussions with MicroStrategy Incorporated (NASDAQ:MSTR), regarding the company’s underperformance. The story has not developed much since then, although MicroStrategy’s stock gained around 25% over the last year, which is approximately the same period since Apex sent its letter.

At the end of 2014, the top three holdings in Apex’s 13F portfolio were represented by Netflix, Inc. (NASDAQ:NFLX)Michael Kors Holdings Ltd (NYSE:KORS), and MicroStrategy Incorporated (NASDAQ:MSTR).

According to the last 13F filing, Apex Capital owns 225,100 shares of Netflix, Inc. (NASDAQ:NFLX), up by 26% on the quarter, the value of the stake amounting to $76.90 million. Netflix represented the largest stake in terms of value since the second quarter of last year. Netflix, Inc. (NASDAQ:NFLX) is well-positioned for long-term growth as the company last year expanded its streaming services across several European countries and plans further expansion in the near future. On the back of expansion, the company’s revenues and earnings surged and amounted to $5.51 billion for 2014, versus $4.38 billion a year earlier, while earnings jumped to $4.32 from $1.85. Activist investor Carl Icahn is one of the top shareholders of Netflix, Inc. (NASDAQ:NFLX), holding 1.41 million shares as of the end of 2014. Amid issues with ‘net neutrality‘, Mr. Icahn has been selling shares of Neflix since the last quarter of 2013, a move that he admitted he regrets in an interview earlier this year.

The fund also increased its stake in Michael Kors Holdings Ltd (NYSE:KORS) by 28% on the quarter to 893,000 shares, valued at $67.10 million. Michael Kors is another retailer, although its stock hasn’t performed so well in comparison to Urban Outfitters and lost 34% in the last 52 weeks. The company recently took another hit as an anlyst report from Sterne Agee stated that the company’s sales might have slowed down on the back of bad weather. The analyst also lowered its earnings and revenue estimate and cut the price target to $72.00 from $76.00, keeping ‘Neutral’ rating. Moreover, Michael Kors Holdings Ltd (NYSE:KORS)’s online sales might also be affected from weather as recently the rooftop of one of the company’s e-commerce distribution warehouses collapsed because of heavy snow. Both issues however look like will have a temporary impact on the retailer’s sales. So far, among funds that we track, the largest shareholder of Michael Kors Holdings Ltd (NYSE:KORS) is Stephen Mandel’s Lone Pine Capital, which owns 11.08 million shares as of the end of 2014 (down by 30% on the quarter).

In MicroStrategy Incorporated (NASDAQ:MSTR), that has been discussed earlier, Apex Capital owns around 329,200 shares, valued at $63.69 million. The fund cut its stake in the company by 16% during the fourth quarter, the only reduction made among the fund’s top seven largest holdings. MicroStrategy Incorporated (NASDAQ:MSTR) is a $1.90 billion provider of enterprise software platforms for business intelligence. Apex is the second-largest shareholder among funds that we track, trailing Ricky Sandler‘s Eminence Capital with 846,000 shares.

Disclosure: none