In Thursday intraday trading, American Eagle Outfitters (NYSE:AEO)’s stock has declined by nearly 4% on the back of the company reporting its financial results for the third quarter of fiscal 2015, ended October 31. The company posted an adjusted EPS from continuing operations of $0.35, which represents an increase of 59% on the year. The company’s revenue of $919 million was also higher than the $854 million figure reported a year earlier. Moreover, American Eagle Outfitters managed to beat the EPS expectations by $0.01, but the revenue came short of the consensus estimate of $924.4 million.
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American Eagle Outfitters (NYSE:AEO) also managed to deliver a 9% comparable store sales growth, versus a 5% decline reported for the third quarter of last year. For the current quarter, the company expects to report EPS between $0.40 and $0.42, compared to a consensus estimate of $0.41, while comparable store sales are expected to grow by mid-single digits.
The stock opened around 2.5% higher on Thursday, but has lost ground in the following hours. However, several analysts have reiterated bullish ratings on American Eagle Outfitters (NYSE:AEO), including Cowen and Company and B. Riley, which have reaffirmed ‘Buy’ ratings.
Nevertheless, since the market can sometimes overreact to some news, it’s important to assess the long-term potential of a stock and one of the best metrics that could help us in assessing this is the hedge fund sentiment. During the third quarter, American Eagle Outfitters experienced a slight increase in hedge fund interest, as it was included in the equity portfolios of 40 funds (among over 730 that we track) at the end of September. There were 36 hedge funds in our database with positions in the company at the end of the previous quarter.
In the financial world, there are a lot of signals that stock market investors have at their disposal to appraise their stock investments. Two of the most useful signals are hedge fund and insider trading signals. Our researchers have shown that, historically, those who follow the top picks of the elite fund managers can trounce the market by a superb margin (see the details here).
With this in mind, on the following page, we are going to take a closer look at the hedge fund sentiment towards American Eagle Outfitters (NYSE:AEO), according to the latest round of 13F filings.
How are hedge funds trading American Eagle Outfitters (NYSE:AEO)?
According to Insider Monkey’s hedge fund database, Royce & Associates, managed by Chuck Royce, holds the biggest position in American Eagle Outfitters (NYSE:AEO), which was valued at $71.2 million at the end of September, comprising 0.4% of its 13F portfolio. Sitting at the No. 2 spot is Columbus Circle Investors, led by Clifford Fox, holding a $60.3 million position; 0.5% of its 13F portfolio is allocated to the company. Moreover, Cliff Asness’ AQR Capital Management, Joseph A. Jolson’s Harvest Capital Strategies, and Lee Munder’s Lee Munder Capital Group also reported significant positions in the stock in their latest 13F filing.
Moreover, since the company registered an increase in popularity, a number of funds have initiated long positions. Buckingham Capital Management, managed by David Keidan, opened the most outsized position in American Eagle Outfitters (NYSE:AEO), worth $24.9 million, followed by David Harding’s Winton Capital Management, with a new $14.8 million stake. The following funds were also among the new AEO investors: Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital, Louis Bacon’s Moore Global Investments, and Jerome Debs’s Bodri Capital Management.
Let’s now review hedge fund activity in other stocks that are similar to American Eagle Outfitters (NYSE:AEO) in terms of market cap, specifically These stocks are Industrias Bachoco, S.A.B. de C.V. (ADR) (NYSE:IBA), TC Pipelines, LP (NYSE:TCP), RR Donnelley & Sons Co (NASDAQ:RRD), and FEI Company (NASDAQ:FEIC).
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| IBA | 5 | 50018 | -1 |
| TCP | 4 | 5675 | 1 |
| RRD | 25 | 111669 | 4 |
| FEIC | 15 | 123716 | 2 |
As you can see these stocks had an average of 12 hedge funds with bullish positions and the average amount invested in these stocks was $73 million. As you can see, more hedge funds held shares of American Eagle Outfitters than the most popular stock in this table, RRD. In addition, the funds from our database have amassed $494 million worth of its stock heading into Q4 and held over 16% of the company’s outstanding stock. This suggests that smart money is bullish on American Eagle Outfitters and despite today’s decline, the stock is likely to post solid gains over the medium- to long-term.
Disclosure: none
