10 Most Undervalued Mid Cap Stocks to Buy According to Hedge Funds

4. Abercrombie & Fitch Co. (NYSE:ANF)

Forward P/E Ratio as of March 5: 8.35

Number of Hedge Fund Holders: 51

Abercrombie & Fitch Co. (NYSE:ANF) is a global omnichannel retailer that provides a range of apparel, personal care, and accessories through its popular brands. These include Abercrombie & Fitch, Hollister, and Gilly Hicks. All of these serve customers across multiple channels worldwide.

Abercrombie Brands is a major growth driver for this company and achieved record net sales in Q3 2024. The brand’s net sales experienced a 15% year-over-year increase. This success was driven by sweaters, dresses, jeans, and fleece, with balanced growth between genders. Both unit sales and average unit retail (AUR) contributed to this growth, which also indicated reduced reliance on promotions. Abercrombie Brands is expanding its physical footprint, with plans to open ~40 new stores in 2024.

Abercrombie Brands is implementing marketing campaigns across digital and social channels to drive sales. Abercrombie & Fitch Co. (NYSE:ANF) is investing in new and existing store locations to capitalize on increased traffic and maintain productivity. It’s maintaining clean inventory and ensuring product availability to meet customer demands. Furthermore, the brand is experiencing strong global growth, with double-digit sales increases across the Americas, EMEA, and APAC regions.

ClearBridge Mid Cap Growth Strategy is positive on Abercrombie & Fitch Co. (NYSE:ANF) due to its successful brand repositioning, profitable growth strategy, and focus on key demographics. It stated the following in its Q3 2024 investor letter:

“We are encouraged by the high proportion of positive returns on new ideas added over the last five quarters of elevated new idea generation, with solid contributions to overall performance despite their representing a modest portion of the Strategy’s assets.

We continued to deliver strong new idea generation, adding four new investments in the quarter: OneStream (through participating in its IPO), Abercrombie & Fitch Co. (NYSE:ANF), Wintrust Financial, and FTAI Aviation.

Abercrombie & Fitch is a global retailer with two primary brands, A&F and Hollister, providing apparel and accessories targeting millennials and Gen Z, respectively. Following multiple years of mis-execution, the company has repositioned its brands for durable growth, rationalized its store footprint, and is growing profitably with a nimble, fast-follower fashion strategy.”