Why Kontoor Brands (KTB) Stock is a Compelling Investment Case

Curreen Capital recently released its Q2 2020 Investor Letter, a copy of which you can download here. The fund posted a return of 32.86% for the quarter, outperforming their benchmark, the S&P 500 Index which returned 20.54% in the same quarter. You should check out Curreen Capital’s top 5 stock picks which helped them beat the market by nearly 12 percentage points. There weren’t a lot of funds who could deliver these kinds of returns without shorting the market or using aggressive put options.

In the said letter, Curreen Capital highlighted a few stocks and Kontoor Brands Inc. (NYSE:KTB) is one of them. Kontoor Brands Inc. (NYSE:KTB) is a clothing company. Year-to-date, Kontoor Brands Inc. (NYSE:KTB) stock lost 48.3% and on August 12th it had a closing price of $21.87. Here is what Curreen Capital said:

“I compared Garrett to Kontoor, one of our other investments. Like Garrett, Kontoor had a very attractive upside-to-downside ratio, with significant upside for the stock price if things go as I expect. Like Garrett’s, Kontoor’s CEO is dynamic and has repeatedly surprised me by acting intelligently. But Kontoor had a number of advantages over Garrett: bankruptcy was far less likely, Kontoor had already gotten covenant relief, Kontoor’s business does not face existential threats (everyday jeans are here to stay, with turbochargers… time will tell), and one of Kontoor’s insiders had recently purchased shares.

Kontoor does not have quite as much upside if things go as I expect, but there are more ways to lose with Garrett, and losing with Garrett is more likely to involve a wipeout for shareholders. Comparing the two, Kontoor appeared to be a better bet than Garrett, so I sold our Garrett shares and used the proceeds to buy more Kontoor. Our proceeds from selling Garrett were $5.09/share, and our cost for buying Kontoor was $15.57/share.

Kontoor designs inexpensive jeans, primarily for North American consumers. Kontoor spun out of VF Corp in May 2019. Kontoor does not grow, and its returns on capital are about 20%. Management uses free cash flow to repay debt. Kontoor currently trades at an extremely attractive upside-to-downside ratio.”

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Last month, we published an article revealing that Brown Advisory is bearish about Kontoor Brands Inc. (NYSE:KTB) stock. The investment firm said that the company’s business operations are severely impacted by the COVID-19 crisis.

Our calculations showed that Kontoor Brands Inc. (NYSE:KTB) isn’t ranked among the 30 most popular stocks among hedge funds.

The top 10 stocks among hedge funds returned 185% since the end of 2014 and outperformed the S&P 500 Index ETFs by more than 109 percentage points. We know it sounds unbelievable. You have been dismissing our articles about top hedge fund stocks mostly because you were fed biased information by other media outlets about hedge funds’ poor performance. You could have doubled the size of your nest egg by investing in the top hedge fund stocks instead of dumb S&P 500 ETFs. Below you can watch our video about the top 5 hedge fund stocks right now. All of these stocks had positive returns in 2020.

Video: Top 5 Stocks Among Hedge Funds

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Disclosure: None. This article is originally published at Insider Monkey.