Wal-Mart Stores, Inc. (WMT) Starts Tuesday in Red Whereas Home Depot Inc (HD) Shines after Quarterly Results

The stock of Wal-Mart Stores, Inc. (NYSE:WMT) lost 3% after the retailer announced lower-than-expected earnings for the second quarter of fiscal 2016. On the other hand, another retailer, Home Depot Inc (NYSE:HDgained ground in the first hours of trading on the back of quarterly financial results that beat the estimates. Wal-Mart’s earnings of $1.08, missed the estimates of $1.12, but its revenue of $120.2 billion, was above the estimates of $119.9 billion. At the same time, Home Depot delivered earnings of $1.71 per share on revenue of $24.8, which were marginally better than EPS of $1.70 and revenue of $24.7 billion expected by the Street. Let’s take a closer look at both companies and see the hedge fund sentiment surrounding each of them after the latest round of 13F filings.


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 from 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 123% over the last 35 months, which is more than 65 percentage points higher than the returns of the S&P 500 ETF (SPY) (see more details).

It’s important to mention that another reason that fueled the decline of Wal-Mart Stores, Inc. (NYSE:WMT)’s is lower earnings guidance provided by the company. Wal-Mart Stores, Inc. (NYSE:WMT) has revised its earnings guidance for fiscal 2016 between $4.40 and $4.70 per share against previous outlook of $4.70 to $5.05. However, it’s important to point out that the cut of earnings guidance comes on the back of Wal-Mart’s decision to increase wages, which will also increase sales due to a higher customer service quality.

In July, Wal-Mart completed the acquisition of Yihaodian, a Chinese e-commerce business, in which it had held a 51% stake since 2012. Yihaodian has current customer base exceeding 100 million users with more than 4 million products listed on its website.

Overall, smart money from our database like Wal-Mart Stores, Inc. (NYSE:WMT), as, during the second quarter, the number of funds with long positions in the company went up to 65 from 63, but the aggregate value of their investments declined to $8.52 billion from $9.21 billion, amid a 14% drop of the stock. One of the largest shareholders of Wal-Mart is Warren Buffett’s Berkshire Hathaway, which owns 60.39 million shares as of the end of June, while Bill and Melinda Gates Foundation Trust, managed by Michael Larson, holds some 11.60 million shares.

Let’s move on to Home Depot Inc (NYSE:HD),  which, in addition to better than expected results, also increased its guidance for the full year and currently  expects EPS between $5.31 and $5.36 versus the previous range of $5.24 to $5.27.

In terms of hedge fund activity, the investors from our database maintain a positive outlook for Home Depot Inc (NYSE:HD), as 67 funds disclosed holding $3.72 billion worth of stock. Moreover, during the April – June period, Home Depot witnessed an increase in popularity, as the number of investors with long positions went up from 58 funds with aggregate holdings worth $3.15 billion at the end of March. Among these funds, Ken Fisher’s Fisher Asset Management is one of the largest shareholders of Home Depot with a $926 million stake that contains 8.33 million shares, according to its latest 13F filing.

Disclosure: None