Ralph Lauren Corp (RL), VF Corp (VFC): The Stage Is Set for Apparel Stocks

VF has seen outdoor and action sports as its fastest growing segment and it made up 50% of revenue during 1Q 2013. This segment markets outdoor and activity-based products of authentic lifestyle brands. Meanwhile, its other big segment is jeans wear, which includes the Lee, Wrangler, Rustler, and Riders brands. Operating margins for VF are expected to be more robust at 14.7% in 2013 than PVH, driven by the shift toward higher-profit margin outdoor and action brands.

By the numbers

VF Corp (NYSE:VFC) has the most impressive return on equity (ROE).

What’s more is that both VF and PVH have very impressive PEG ratios thanks to the compelling valuation and strong expected growth. VF has a PEG ratio of 0.7 and PVH of 0.35, compared to Ralph Lauren’s 2.1, making both stocks growth at a reasonable price opportunities.

Hedge fund trade

PVH also leads the pack in terms of hedge fund interest. Going into 2Q, there were a total of 39 hedge funds long the stock, which was an 18% increase from the prior quarter. Dough Silverman’s Senator Investment Group has the most valuable position, at $117 million (see Senators’ top picks).

Behind PVH is Ralph Lauren Corp (NYSE:RL) with 34 hedge funds long the stock, including billionaire Stephen Mandel’s Lone Pine Capital with the largest position in the stock at $534 million (check out Lone Pine’s top stock picks).

VF Corp had only 14 hedge funds long the stock at the end of 1Q, which was an 18% decrease from the first quarter. Ric Dillon’s Diamond Hill Capital has the largest position in the stock at $160 million (check out Diamond Hill’s top stocks).

Bottom line

It appears that both VF Corp and PVH are positive long-term bets on the apparel industry, which will be driven by lower unemployment and higher consumer discretionary spending. PVH has the lowest PEG given the company’s valuation and growth, but VF offers investors a solid PEG and robust ROE.

Marshall Hargrave has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Marshall is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

The article The Stage Is Set for Apparel Stocks originally appeared on Fool.com and is written by Marshall Hargrave.

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