Wal-Mart Stores, Inc. (WMT), Lowe’s Companies, Inc. (LOW) & More: The Smart Money’s Top 10 Retail Plays

On net, ten funds bought into troubled department store J.C. Penney Company, Inc. (NYSE:JCP) last quarter, joining billionaire Bill Ackman’s Pershing Square in that fund’s quest to turn the company around. See more stocks in Ackman’s portfolio. J.C. Penney’s revenue has continued to fall, and Wall Street analysts believe it will still be unprofitable next year. 29% of the float is held short.

Grabbing the sixth spot on our list is Dollar Tree, Inc. (NASDAQ:DLTR). As with Dollar General, this retailer is growing slowly, has little market exposure, and features earnings multiples in the high teens. Tiger Cub John Griffin’s Blue Ridge Capital disclosed ownership of 4.2 million shares as of the beginning of July.

43 hedge funds and other investors were long CVS Caremark Corporation (NYSE:CVS) per our database of filings. The stock carries trailing and forward P/Es of 17 and 13 respectively. AQR Capital Management closed Q2 with 3.1 million shares in its portfolio; that fund is managed by Cliff Asness (see Asness’s favorite stocks).

With a number of funds selling out of Walgreen Company (NYSE:WAG) between April and June, that pharmacy and convenience store fell to eighth place behind its rival CVS. Insurance company Markel’s investment unit, managed by Tom Gayner, kept its holdings about constant (here are more stocks from Markel’s portfolio).

J.C. Penney wasn’t the only turnaround prospect to make the list, as we recorded 39 filers with positions in Best Buy Co., Inc. (NYSE:BBY),which beat analyst expectations last quarter though it still has a ways to go. Billionaire Steve Cohen’s SAC Capital Advisors slightly increased its holdings (find more of Cohen’s picks).

Auto parts retailer AutoZone, Inc. (NYSE:AZO) rounds out our list of hedge funds’ favorite retail stocks. It is a low beta stock (beta of 0.2) and has been generating small increases in both revenue and profits. At 16 times trailing earnings, the company does not need to grow by much in order to justify its current valuation.

Disclosure: I own no shares of any stocks mentioned in this article.