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Why Traders Are Keeping a Close Eye on Gap Inc (GPS)

Gap Inc (NYSE:GPS) is on many watch-lists today after analyst Matthew Boss of JPMorgan upped his rating on the retailer to ‘Neutral’ from ‘Underweight’. Boss also raised his target price to $24 from the previous $21 per share, citing fieldwork research that indicated more stable sales at the company’s Old Navy division. Given that Gap shares have lagged over the past year and a half, Boss feels that the stock’s valuation is no longer overpriced versus peers.

Shares of the fashion retailer had previously suffered due to slowing sales, but have been mostly range-bound in recent months. Gap Inc (NYSE:GPS) is up 9% year-to-date and yields around 3.8% at current prices. Today’s upgrade could potentially improve sentiment.

What Does The Smart Money Sentiment Say?

At Insider Monkey, we’ve developed an investment strategy that has delivered market-beating returns over the past 12 months. Our strategy identifies the 100 best-performing funds of the previous quarter from among the collection of 700+ successful funds that we track in our database, which we accomplish using our returns methodology. We then study the portfolios of those 100 funds using the latest 13F data to uncover the 30 most popular mid-cap stocks (market caps of between $1 billion and $10 billion) among them to hold until the next filing period. This strategy delivered 39.7% gains over the past 12 months and outperformed the 24.1% gain enjoyed by the S&P 500 ETFs. Our enhanced small-cap hedge fund strategy returned more than 45% over the last 12 months and outperformed SPY by more than 30 percentage points over the last 4.5 years (see details here).

Smart money sentiment in Gap was almost unchanged in Q4. According to our data of 742 top funds, 28 reported long positions of $290.41 million of Gap Inc (NYSE:GPS) and accounted for 3.20% of the float on December 31, versus 28 funds and $298.91 million on September 30. Some hedge funds do seem bearish, however. 13.25% of Gap’s float is short according to recent data.

The Bottom Line

Gap Inc (NYSE:GPS) is trending due to a Wall Street upgrade. For those of you interested, check out ‘Largest Online Retailers in the World‘.

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