Barnes & Noble, Inc. (NYSE:BKS) reports a decline in sales for the fourth quarter of its fiscal year 2015 which ended May 2. According to the bookstore chain operator, revenue was $1.18 billion for the most recent quarter, down 10.4% compared to its fourth quarter in 2014. Net loss, however, improved to $19.4 million, or $0.37 per share, compared to its loss of $36.7 million, or $0.72 per share, in the same quarter last year. For the full 2015 fiscal year, revenues were $6.1 billion, down 4.9% compared to the previous year. The firm reported net earnings or $36.6 million, or $0.21 per share, an improvement from the net loss of $47.3 million, or $1.12 per share, in 2014. The firm reported declines in revenues in its Retail, College and Nook divisions.
However, according to Michael P. Huseby, Chief Executive Officer of Barnes & Noble, Inc. (NYSE:BKS), the brighter side of the picture is that the firm successfully improved its balance sheet. For the next year, the firm expects Retail core comparable bookstore sales which exclude NOOK sales, to increase by about 1%. It also expects its College unit sales to grow about 1%. Aside from the gloomy fourth quarter and full 2015 fiscal year report, Barnes & Noble, Inc. (NYSE:BKS) can also add decreased hedge fund activity to its list of bad news.
We pay attention to hedge funds’ moves because our research have shown that hedge funds are extremely talented at picking stocks on the long side of their portfolios. It is true that hedge fund investors have been underperforming the market in recent years. However, this was mainly because hedge funds’ short stock picks lost a ton of money during the bull market that started in March 2009. Hedge fund investors also paid an arm and a leg for the services that they received. We have been tracking the performance of hedge funds’ 15 most popular stock picks in real time since the end of August 2012. These stocks returned 142% since then and outperformed the S&P 500 Index by 84 percentage points (see more details here). That’s why we believe it is important to pay attention to hedge fund sentiment. Plus, we also don’t like paying huge fees.
Apart from tracking hedge fund activity, Insider Monkey also looks at insider activity at companies like Barnes & Noble, Inc. (NYSE:BKS). This is done in order to have another indicator with which to judge whether a company’s stock is a good investment. Insider activity yields insight on how confident or not that company’s management is on its stock. For Barnes & Noble, there were no purchases of shares by insiders in the first or second quarter of the year. As for sales, there were a number. CEO Mitchell Klipper sold 79,538 shares in March. Chief Information Officer Christopher Troia sold 27,271 shares on April 15. Vice President David Deason sold 16,113 shares in March.
With all of this in mind, we’re going to check out the recent action encompassing Barnes & Noble, Inc. (NYSE:BKS).
Hedge fund activity in Barnes & Noble, Inc. (NYSE:BKS)
At the end of the first quarter, a total of 26 of the hedge funds tracked by Insider Monkey were long in this stock, a decrease of 13% from the previous quarter. The total value of holdings also declined from $307.18 million in the last quarter of 2014 to $291.35 million in the first quarter of 2015, a decline of 5.15%. The stock grew 2.28% in the first quarter.
Abrams Capital Management, managed by David Abrams, holds the most valuable position in Barnes & Noble, Inc. (NYSE:BKS). Abrams Capital Management has a $97.7 million position in the stock in 4.11 million shares comprising 7.3% of its 13F portfolio. Second to Abrams Capital Management is Tontine Asset Management, managed by Jeffrey Gendell, which held a $34.1 million position. The fund has 5.3% of its 13F portfolio invested in the stock. Other members of the smart money that hold long positions comprise Joel Greenblatt’s Gotham Asset Management, Curtis Schenker and Craig Effron’s Scoggin and Jim Simons’s Renaissance Technologies.
Judging by the fact that Barnes & Noble, Inc. (NYSE:BKS) has faced declining sentiment from smart money, there were a few money managers that decided to sell off their positions entirely at the end of the first quarter. It’s worth mentioning that Timothy S. Peterson‘s Regiment Capital cut the biggest position of all the hedgies watched by Insider Monkey, valued at an estimated $44.2 million in about 1.9 million calls. Richard Rubin of Hawkeye Capital was right behind this move, as the fund dumped about $13.7 million worth.
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With disappointing numbers as well as a decrease in hedge fund interest, we would not recommend a long position in Barnes & Noble, Inc. (NYSE:BKS). We should note that Abrams Capital’s involvement in the stock is a small positive though. Most investors don’t know about this value investor who became a billionaire by identifying undervalued value stocks. We will keep following BKS and Abrams’ moves in this stock.
Disclosure: None
