One of the best ways of picking stocks in a sector is focusing on the stock picks of hedge fund managers that are experts in these sectors. These sector-focused hedge funds perform a couple of percentage points better than other hedge funds. Buckingham Capital is a hedge fund that specializes in the retail sector. The hedge fund managed to outperformed the retail index by a large margin over the past decade, and has been one of the more successful hedge funds in the country.
Buckingham Capital Management was founded by David Keidan in 1980. Based in New York, BCM conducts in-house research focusing on sector allocation and individual security selection to take advantage of both value and growth opportunities. When it comes to retail, apparel, and footwear stocks, we closely follow Buckingham's moves.
BCM reduced its portfolio from $1.8 billion at the end of the second quarter to $969 million at the end of September. The company also reduced its number of holdings from 146 to 113. BCM sold out a few positions over the third quarter. The fund disclosed ownership of $50 million worth of Dillards Inc (DDS) at the end of June and it did not report to own any shares in DDS at the end of September. DDS returned 16.26% since the end of September. BCM also sold out Nordstrom Inc (JWN) during the third quarter. JWN returned 7.92% since the end of third quarter, underperforming the market by almost 3%. In addition to DDS and JWN, BCM also sold out Signet Jewelers Ltd (SIG), Kohls Corp (KSS), Guess Inc (GES), MGM Resorts International (MGM), Bank of America Corp (BAC), and Monro Muffler Brake Inc (MNRO).
BCM increased its position in Las Vegas Sands Corp (LVS) by 32% over the third quarter. It disclosed ownership of $22.4 million worth of LVS at the end of September. The stock returned 24.07% since the end of September, beating SPY by over 12 percentage points. BCM also increased its position in Perry Ellis International Inc (PERY) by 46% to $13 million. The stock returned 18.19% since the end of the third quarter. Besides LVS and PERY, BCM increased its stake in G-III Apparel Group (GIII), Children’s Place Retail Store (PLCE) and Jos A Bank Clothiers (JOSB) as well.
Over the third quarter, BCM bought new stakes in Polaris Industries Inc (PII). BCM initiated a brand new $13 million of PII stocks. PII returned 29.36% since the end of September, beating the market by almost 18 percentage points. The fund sold out Steven Madden Ltd (SHOO) over the second quarter, but initiated an $11 million position in SHOO in the third quarter after the stock price declined. It seems that BCM knows when to buy and sell the stock. SHOO lost 19.74% during the second quarter, underperforming the market by 6%, but the stock returned 21.16% since the end of September, beating the market by almost 10 percentage points.
BCM is also bullish about Charming Shoppes Inc (CHRS). The fund initiated a brand new $10.4 million CHRS stocks during the third quarter. BCM made a bundle from this position as CHRS returned 43.08% since the end of the third quarter. BCM also opened new positions in Electronic Arts Inc (ERTS), Ascena Retail Group (ASNA), Keycorp (KEY), Brinker International Inc (EAT), Anixter International Inc (AXE), and Teavana Holdings (TEA).
We like David Keidan and his Buckingham Capital Management. Most of the fund's new moves during the third quarter generated higher returns than the market since the end of the third quarter. We believe that by focusing on the stock picks of BCM, investors are more likely to beat the market in the long term.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.