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The surprising stock that hedge funds love

Lawrence Lewitinn
Talking Numbers
The surprising stock that hedge funds love

Anthony Scaramucci, managing partner of SkyBridge Capital, on the stock hedge funds are falling in love with -- and it's not one you'd expect.

While the stock market has had a great run this year, a lot of attention has been paid to a small set of shares that have tripled or quadrupled in price since the start of 2013. In particular, much has been written about the likes of Netflix and Tesla. But, what may really surprise people is the kind of stocks hedge funds are currently adding to their portfolio.

Looking at what the so-called “smart money” is up to right now is Anthony Scaramucci, managing partner of the $8.6 billion fund-of-funds SkyBridge Capital. Scaramucci is known throughout Wall Street for having his finger on the pulse of what hedge funds are doing with their money.

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“I think [hedge funds] are participating now and they’ve waded more deeply into stocks,” says Scaramucci. However, he’s not seeing hedge funds going after the highflyers that have been grabbing headlines as of late.

”The marginal dollar is being allocated to more defensive names,” says Scaramucci. “The more aggressive stories like Tesla or Twitter, people are staying away from. Particularly Twitter, with a 50 times revenue handle. But, that’s not to say they’re not driving in some momentum stocks.”

Yet it may astonish people that Scaramucci is seeing the smart money going after what some would consider low-tech.

“We cover 1,200 hedge funds and we get to look at portfolios of over 500 of those,” says Scaramucci. “What is persistent and throughout those portfolios are retail names. The hedge fund community is making a bet consumer is going to return to the marketplace in 201, there’s going to be higher consumption spending [and] better-than-expected GDP numbers.”

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Out of the hundreds of retail stocks in the market right now, there’s a single standout, according to Scaramucci.

“One name we like and we see in the space is Carter’s,” says Scaramucci. And, no, he’s not talking about luxury watch maker Cartier. He’s talking about Carter’s Inc.

“It’s the largest player in the children apparel industry,” notes Scaramucci. “It sold wholesale to over 4,000 department stores. This thing is a best-in-class brand and it’s viewed by the hedge fund community as what we’d call defensive children’s apparel.”

To hear why Scaramucci sees hedge funds as being particularly attracted to Carter’s, watch the rest of his interview with Talking Numbers in the video above.

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