10 Stocks That Will Bounce Back According To Hedge Funds

2. Capri Holdings Limited (NYSE:CPRI)

Year-To-Date Loss: 57.54%

Number of Hedge Fund Investors In Q3 2024: 57

Capri Holdings Limited (NYSE:CPRI) is a luxury British apparel brand. This makes it unsurprising that the firm has struggled in 2024, a year characterized by weak consumer spending across the world and weak economic performance in key regions such as Europe and China. The firm operates primarily through its three key brands, Michael Kors, Versace, and Jimmy Choo. As of H1 2024, Michael Kors accounted for 66% of Capri Holdings Limited (NYSE:CPRI)’s sales, while The Americas accounted for 55%. Sales in all regions dropped annually, and the weak performance has also been due to the firm’s strategic missteps such as weak implementation of an eCommerce platform for Michael Kors. Capri Holdings Limited (NYSE:CPRI)’s shares sank by a tremendous 46% in October after a deal for it to be acquired by Tapestry fell through and the premium that investors were expecting was priced out. Looking ahead, the firm’s hypothesis depends on successful brand execution, a potential split-up, and economic recovery in key regions such as Europe, China, and Japan.

Conventum-Alluvium Global Fund mentioned Capri Holdings Limited (NYSE:CPRI) in its Q3 2024 investor letter. Here is what the fund said:

“As we await the judge’s deliberations in the Federal Trade Commission (FTC) case regarding Tapestry’s acquisition of Capri Holdings Limited (NYSE:CPRI), (up 28.3%) the evidence from Capri’s first quarter earnings release again suggests the fundamentals are weak, particularly in the Michael Kors division (interestingly a point stressed during the FTC hearings). There was no reason to change our Capri analysis, as we had fully factored such weakness after we updated it post the full year results. Tapestry’s results were far more impressive. Tapestry’s management also stressed its commitment to the Capri deal and highlighted that over the prolonged acquisition period (due to the FTC case) it had identified more synergies. Interestingly, whilst we slashed our Capri valuation by 26% last quarter, when we look at the value of Tapestry (on a combined entity basis), and not having any regard for those additional synergies, our valuation has increased as a result of the better than expected core Tapestry earnings stemming from its Coach, Kate Spade and Stuart Weitzman brands.”