7 Best Small-Cap Value Stocks to Buy According to Hedge Funds

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

Market Cap: $7.15 billion 

Forward P/E: 13.52

EPS Growth This Year: 64.80%

Number of Hedge Fund Holders: 48

Abercrombie & Fitch (NYSE:ANF) is a global, digitally-led omnichannel retailer offering personal care products, apparel, and accessories for women, men, and kids. It operates through a portfolio of brands, such as Abercrombie and Fitch, Abercrombie Kids, and Hollister brands, which include Hollister and Gilly Hicks.

The company operates throughout the Americas, APAC, and EMEA. The APAC segment operates in the Asia-Pacific region, including Oceania and Asia. The EMEA segment operates in Europe, the Middle East, and Africa. Abercrombie &Fitch (NYSE:ANF) operates 40 international franchise stores across its brands, primarily in the EMEA region and the Americas.

Q2 2024 marked the seventh consecutive quarter of net sales growth in an uncertain, dynamic consumer environment, showing the company’s strong financials. Its net sales grew by 21% in Q2, reaching $1.1 billion. The primary reasons behind this growth were expansion across regions, genders, and brands. Its agile supply chain and culture of financial discipline give it a competitive advantage, positioning it to deliver goals across various macro environments. To continue its positive trajectory, Abercrombie & Fitch (NYSE:ANF) is expanding its consumer base, developing across key categories, and delivering lifestyle assortments with growing relevance to local customers.

In addition, it plans to open new store locations, amplify its brand portfolio, refresh store experiences, and boost engagement by investing in incremental marketing. The improved marketing investment covers digital and social channels and real-life activations and experiences. Abercrombie & Fitch (NYSE:ANF) is also planning to reintroduce its Hollister brands, expanding its target audience in the process.

It delivered operating leverage in Q2, funding significant marketing, technology, digital, and people investments to strengthen its long-term goals. These efforts led to an operating income of $176 million for Q2, nearly double the results from Q2 2023.

Here’s what Chartwell Investment Partners, LLC said about Abercrombie & Fitch Co. (NYSE:ANF) in its third-quarter 2023 investor letter:

“Within the Carillon Chartwell Small Cap Growth Fund, information technology and industrials were the strongest-performing sectors, with strong stock selection leading to alpha generation. Abercrombie & Fitch Co. (NYSE:ANF) reported very strong earnings driven by significant margin improvement that resulted from much lower shipping and freight costs compared to last year.”