The Gap Inc. (GPS): Is There a Gap in Sentiment About This Stock?

The Gap Inc. (NYSE:GPShas been making some headlines lately, as with the holiday shopping season in full swing, retailers are in the spotlight to see whether they will make the sales goals they need to forge ahead in 2014. Recently, The Gap Inc. reported that November sales were up a decent 8 percent over the same month in 2012, and that month was 3-percent better than in 2011. Sales this past month were quoted at $1.63 billion. And last month, The Gap Inc. announced it was going to conduct a new $1 billion share buyback program, just a few months after completing a $790 million program previously. The company was also increasing its dividend from 60 cents to 80 cents a share.

With such news, does this make the stock a good buy opportunity? The Gap Inc. (NYSE:GPS) investors should pay attention to an increase in activity from the world’s largest hedge funds of late.


The Gap Inc. (NYSE:GPS)

What does the smart money think about The Gap Inc. (NYSE:GPS)?

At Q3′s end, 44 of the hedge funds tracked by our friends at Insider Monkey were bullish in this stock, a 26-percent increase from the second quarter. With hedge funds’ capital changing hands, there exists an “upper tier” of noteworthy hedge fund managers who were boosting their stakes considerably.

When looking at the hedgies followed by Insider Monkey, Lone Pine Capital, managed by Stephen Mandel, holds the most valuable position in The Gap Inc. (NYSE:GPS). Lone Pine Capital has an $898.5-million position in the stock, comprising 4 percent of its 13F portfolio. Coming in second is Edward Lampert of ESL Investments, with a $265.2-million position; 7.6 percent of its 13F portfolio is allocated to the company. Remaining members of the smart money that are bullish include John Griffin’s Blue Ridge Capital, Cliff Asness’ AQR Capital Management and Jim Simons’ Renaissance Technologies.

With a general bullishness among the heavyweights, key money managers were leading the bulls’ herd. Stevens Capital Management, managed by Matthew Tewksbury, established the biggest position in The Gap Inc. (NYSE:GPS). Stevens Capital Management had $25.3 million invested in the company at the end of the quarter. Paul Marshall and Ian Wace’s Marshall Wace LLP also initiated a $21.3-million position during the quarter. The other funds with new positions in the stock are Glenn Russell Dubin’s Highbridge Capital Management, David Costen Haley’s HBK Investments, and Larry Foley and Paul Farrell’s Bronson Point Partners.

How are insiders trading The Gap Inc. (NYSE:GPS)?

Bullish insider trading is particularly usable when the company we’re looking at has experienced transactions within the past half-year. Over the last six-month time period, The Gap Inc. (NYSE:GPS) has seen zero unique insider purchases and eight insider sales (see the details of insider trades here).

Let’s go over hedge fund and insider activity in other stocks similar to The Gap Inc. (NYSE:GPS). These stocks are Urban Outfitters, Inc. (NASDAQ:URBN), Nordstrom, Inc. (NYSE:JWN), Michael Kors Holdings Ltd (NYSE:KORS), Limited Brands, Inc. (NYSE:LTD), and Ross Stores, Inc. (NASDAQ:ROST). All of these stocks are in the apparel stores industry and their market caps resemble GPS’s market cap.

Company Name # of Hedge Funds # of Insiders Buying # of Insiders Selling
Urban Outfitters, Inc. (NASDAQ:URBN) 44 0 5
Nordstrom, Inc. (NYSE:JWN) 29 0 12
Michael Kors Holdings Ltd (NYSE:KORS) 51 1 2
Limited Brands, Inc. (NYSE:LTD) 22 0 4
Ross Stores, Inc. (NASDAQ:ROST) 36 0 4

The recent bullishness has improved The Gap Inc. (NYSE:GPS)’s standing among hedge funds, as it is now tied with Urban Outfitters, Inc. (NASDAQ:URBN) as the No. 2 choice among hedgies in this peer group. And in terms of insider activity, The Gap Inc. is a popular stock right behind the action with Nordstrom, Inc. (NYSE:JWN).



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