Sears Holdings Corporation (NASDAQ:SHLD)’s stock has advanced by nearly 4% so far today after the company reported an adjusted loss of $1.86 a share for the fiscal first quarter ended April 30, narrower than the loss of $3.20 per share forecasted by analysts. Revenue in the quarter came in at $5.4 billion, better than the estimated $5.26 billion. The Illinois-based retailer’s same-store sales declined by 5% and by 7.1% at Kmart and Sears stores, respectively. Sears Holdings Corp (NASDAQ:SHLD)’s CEO Edward Lampert said that the performance in the quarter was “well below” the goals, but the company managed to improve earnings before interest, tax, depreciation and amortization due to the reduction in expenses. Mr. Lampert said that a massive promotional competitive environment in the market hurt the company’s business in the quarter.
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If you’d ask most traders, hedge funds are assumed to be unimportant, old investment tools of years past. While there are greater than 8000 funds with their doors open at the moment, Our researchers look at the upper echelon of this club, around 700 funds. Most estimates calculate that this group of people watch over most of the hedge fund industry’s total asset base, and by keeping an eye on their highest performing picks, Insider Monkey has determined many investment strategies that have historically defeated the market. Insider Monkey’s small-cap hedge fund strategy outperformed the S&P 500 index by 12 percentage points per year for a decade in their back tests.
Keeping this in mind, we’re going to take a gander at the new action encompassing Sears Holdings Corporation (NASDAQ:SHLD).
Heading into the second quarter of 2016, a total of 20 of the hedge funds tracked by Insider Monkey were bullish on this stock, flat over the quarter. With hedge funds’ capital changing hands, there exists an “upper tier” of notable hedge fund managers who were upping their stakes substantially (or already accumulated large positions).
When looking at the institutional investors followed by Insider Monkey, Fairholme, managed by Bruce Berkowitz, holds the largest position in Sears Holdings Corporation (NASDAQ:SHLD). Fairholme has a $407.2 million position in the stock, comprising 24.6% of its 13F portfolio. The second most bullish fund manager is Sears CEO Edward Lampert’s ESL Investments, which holds a $342 million position; 30.3% of its 13F portfolio is allocated to the company. Some other members of the smart money that are bullish comprise Murray Stahl’s Horizon Asset Management and Debra Fine’s Fine Capital Partners.
On the following page, we are going to mention some funds that decided to unload their entire positions in Sears Holdings during the first quarter. Moreover, it’s important to point out that he level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspective, because a stock may witness a boost in popularity, but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Xcel Energy Inc (NYSE:XEL), Zimmer Biomet Holdings Inc (NYSE:ZBH), and Ventas, Inc. (NYSE:VTR) to gather more data points..
At the top of the heap, William C. Martin’s Raging Capital Management dumped the biggest stake of the 700 funds tracked by Insider Monkey, valued at close to $12.7 million in stock. Cliff Asness’s fund, AQR Capital Management, also dropped its stock, about $1.1 million worth. These transactions are interesting, as total hedge fund interest stayed the same (this is a bearish signal in our experience).
Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Sears Holdings Corporation (NASDAQ:SHLD) but similarly valued. These stocks are Imperva Inc (NYSE:IMPV), Whiting Petroleum Corp (NYSE:WLL), Euronav NV Ordinary Shares (NYSE:EURN), and Super Micro Computer, Inc. (NASDAQ:SMCI). This group of stocks’ market valuations match SHLD’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| IMPV | 15 | 97310 | -15 |
| WLL | 43 | 303578 | 3 |
| EURN | 27 | 218487 | 5 |
| SMCI | 20 | 67806 | 13 |
As you can see these stocks had an average of 26 hedge funds with bullish positions and the average amount invested in these stocks was $172 million. That figure was $982 million in SHLD’s case. Whiting Petroleum Corp (NYSE:WLL) is the most popular stock in this table. On the other hand Imperva Inc (NYSE:IMPV) is the least popular one with only 15 bullish hedge fund positions. Sears Holdings Corporation (NASDAQ:SHLD) is not the least popular stock in this group, but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. In this regard WLL might be a better candidate to consider a long position.
Disclosure: None
