RS Investments, an investment management company, released its “RS Mid Cap Value Strategy” third quarter 2024 investor letter. A copy of the letter can be downloaded here. During the third quarter, the rally of the year persisted, with the broad market, indicated by the S&P 500® Index, posting nearly a 6% return. This brings the total return to over 22% for the first three quarters of the year. In the third quarter, the strategy underperformed its benchmark Russell Midcap® Value Index (the “Index”) and returned 8.9% net versus a return of 10.1% for the Index. Strong performance from stock selection in Consumer Staples and Financials aided relative performance of the strategy in the quarter, while stock selection in Information Technology and Industrials detracted. In addition, you can check the fund’s top 5 holdings to determine its best picks for 2024.
RS Mid Cap Value Strategy highlighted stocks like PVH Corp. (NYSE:PVH) in the third quarter 2024 investor letter. PVH Corp. (NYSE:PVH) is an apparel company. The one-month return of PVH Corp. (NYSE:PVH) was -2.40%, and its shares lost 12.65% of their value over the last 52 weeks. On January 3, 2025, PVH Corp. (NYSE:PVH) stock closed at $105.48 per share with a market capitalization of $5.868 billion.
RS Mid Cap Value Strategy stated the following regarding PVH Corp. (NYSE:PVH) in its Q3 2024 investor letter:
“PVH Corp. (NYSE:PVH) is a global apparel company operating under two primary banners: Calvin Klein and Tommy Hilfiger. In 2021, Stefan Larsson took the reins as CEO of PVH. Larsson is a proven leader in the apparel space, with successful track records at H&M, Old Navy, and Ralph Lauren. Thus far at PVH, he has streamlined the business by selling non-core brands and has shown early success in his initiatives to elevate the product and improve brand perception with more culturally relevant marketing. More importantly, in the next two to three years we believe there is a significant margin expansion opportunity that will be unlocked as he integrates the supply chains and systems of the business that have historically been operated separately by each brand. In addition, PVH will be bringing in-house the U.S. women’s businesses of both Calvin and Tommy, which are currently being licensed to another company. Under our base case, we see earnings per share increasing by 50% to 60% over our investment time horizon.
Despite trading at an undemanding 10%+ free cash flow yield, PVH shares underperformed in the third quarter as the company cautioned against a slightly slower consumer demand environment in the second half of 2024 in a couple of international geographies, including China. While the global consumer macro situation at present is not particularly strong, we believe there are enough self-help opportunities at PVH to drive company-specific improvements in the business over the next few years that will ultimately lead to improved share price performance. We continue to hold PVH and will look to add to our position over the coming quarters as we get closer to the time of expected top-line inflection.”
A customer trying on a sports jacket in-store, showcasing the company’s sportswear range.
PVH Corp. (NYSE:PVH) is not on our list of 30 Most Popular Stocks Among Hedge Funds. As per our database, 27 hedge fund portfolios held PVH Corp. (NYSE:PVH) at the end of the third quarter which was 32 in the previous quarter. While we acknowledge the potential of PVH Corp. (NYSE:PVH) as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is as promising as NVIDIA but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
In another article, we discussed PVH Corp. (NYSE:PVH) and shared the list of top luxury stocks according to hedge funds. In addition, please check out our hedge fund investor letters Q3 2024 page for more investor letters from hedge funds and other leading investors.
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Disclosure: None. This article is originally published at Insider Monkey.