The markets have quietly taken off after opening flat in the first hours of trading, but have inched down in the afternoon dragged by a decline in oil prices.
Nevertheless, several stocks, including Restoration Hardware Holdings Inc (NYSE:RH), Williams-Sonoma, Inc. (NYSE:WSM), Stone Energy Corporation (NYSE:SGY), Pier 1 Imports Inc (NYSE:PIR), and Transocean LTD (NYSE:RIG), are gaining ground today. Let’s find out why traders are buying and see what the funds from our database think about these companies.
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Restoration Hardware Surges On Buyout Speculation
Restoration Hardware Holdings Inc (NYSE:RH) shares have advanced by nearly 8% after analysts at BB&T said Williams-Sonoma, Inc. (NYSE:WSM) could acquire the company for $50 per share. Although that’s almost twice Restoration Hardware’s current price, the deal would still be accretive to Williams-Sonoma’s earnings by 16% and 25% respectively for fiscal year 2017 and 2018. Shares of Restoration Hardware have plunged by 67% year-to-date due to a string of earnings misses and extremely soft guidance. For the full year, Restoration Hardware expects EPS of $0.28-$0.33 versus the average analyst estimate of $0.80 per share. It is unclear whether Restoration management can turn around the ship without the stock falling further. A buyout could be the company’s best option if available and if the negative earnings trend doesn’t reverse. Among the funds we track, 38 funds owned $301.24 million of Restoration Hardware Holdings Inc (NYSE:RH), which accounted for 17.80% of the float on March 31, versus 33 funds and $1.01 billion a quarter earlier. A total of 31 funds from our database had a long position in Williams-Sonoma, Inc. (NYSE:WSM) at the end of March, up by 10 funds from the previous quarter.
On the next page, we examine Stone Energy Corporation, Pier 1 Imports, and Transocean LTD.
Momentum Buying at Stone Energy Continues
Stone Energy Corporation (NYSE:SGY) is up by more than 10% today as bullish technical traders continue to bet that the stock’s recent momentum will continue. Shares of the company surged on June 14 when Stone Energy disclosed that it had made an interest payment on senior notes that were due in May, and that it had made a borrowing base deficiency payment in the amount of $29.2 million as well. Although Stone Energy will need considerably higher crude prices to do well fundamentally, traders with short term holding periods don’t seem to mind as they hope to flip their shares higher to other bidders. Among the funds we track, 15 funds owned shares of Stone Energy Corporation (NYSE:SGY) at the end of the first quarter.
Analyst Give the Thumbs Up to Pier 1
Analysts at Wolfe Research upgraded Pier 1 Imports Inc (NYSE:PIR) to ‘Peer Perform’ from ‘Underperform’ on Wednesday and, not surprisingly, shares of the specialty retailer have popped by over 2% as a result. Shares of Pier 1 Imports are up by over 11% year-to-date and offer investors a dividend yield of nearly 5% at current prices. A total of 13 funds tracked by us were long Pier 1 Imports Inc (NYSE:PIR) at the end of March, up by one from the previous quarter.
Transocean Rises Despite EIA Report
Although today’s EIA report was a major downer versus the API report yesterday, Transocean LTD (NYSE:RIG)’s shares have nevertheless surged by 5% in morning trading. Part of the reason for the rally could be that some traders are expecting Britain to remain in the EU after the tomorrow’s referendum. If that occurs, WTI and Brent prices could rally as the dollar would be in less demand. Given that Transocean needs higher Brent prices to do well fundamentally, traders could be using Transocean stock as a high-beta way to play the vote and to ride the crude rally (for however long it lasts). Overall, 39 funds in our database were long Transocean LTD (NYSE:RIG) at the end of March, up by eight funds from the previous quarter.