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Is Ralph Lauren (RL) a Smart Long-term Buy?

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Alex Smith
·3 min read
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Heartland Value Plus Fund recently released its third-quarter investor letter – a copy of which is available for download here. The fund posted a return of -0.2% for the quarter, underperforming its benchmark, the Russell 2000 Value Index which returned 2.6% in the same quarter. You should check out Heartland's top 5 stock picks for investors to buy right now, which could be the biggest winners of 2021.

In the Q3 2020 Investor Letter, Heartland Advisors highlighted a few stocks and Ralph Lauren Corp (NYSE:RL) is one of them. Ralph Lauren Corp (NYSE:RL) is a fashion company. Year-to-date, Ralph Lauren Corp (NYSE:RL) stock lost 13.7% and on December 18th it had a closing price of $101.21. Here is what Heartland Advisors said:

"The business climate remains cloudy. As such, we continue to seek companies trading at attractive valuations, with strong management teams and that have avenues to succeed under multiple scenarios. For example, we initiated a position in Ralph Lauren Corp. (RL), a global lifestyle company that sells clothing, accessories and home goods.

Shares of Ralph Lauren tumbled earlier this year during the COVID-19 selloff. The stock has yet to fully recover as investors continue to cast a skeptical eye toward apparel companies and retail brands in the Consumer Discretionary space. While the global pandemic has been a severe blow to the beleaguered apparel industry, we view Ralph Lauren as a relative winner in the space.

Ralph Lauren is a best-in-breed brand with high gross profit margins and a loyal clientele. Management is using the disruption from the pandemic to accelerate cost-cutting efforts and pivot to an e-commerce growth model. With approximately $800 million in net cash on its balance sheet, we believe Lauren is well prepared to weather current headwinds in retail and should increase sales and earnings in the long-term. Despite our favorable outlook, shares are trading at roughly 6x enterprise value/next year’s earnings before interest, taxes, depreciation and amortization."

Best Things to Sell on Poshmark
Best Things to Sell on Poshmark

Africa Studio/Shutterstock.com

In Q2 2020, the number of bullish hedge fund positions on Ralph Lauren Corp (NYSE:RL) stock decreased by about 4% from the previous quarter (see the chart here), so a number of other hedge fund managers don't believe in Ralph Lauren's growth potential. Our calculations showed that Ralph Lauren Corp (NYSE:RL) isn't ranked among the 30 most popular stocks among hedge funds.

The top 10 stocks among hedge funds returned 216% since the end of 2014 and outperformed the S&P 500 Index ETFs by more than 121 percentage points. We know it sounds unbelievable. You have been dismissing our articles about top hedge fund stocks mostly because you were fed biased information by other media outlets about hedge funds' poor performance. You could have doubled the size of your nest egg by investing in the top hedge fund stocks instead of dumb S&P 500 ETFs. Below you can watch our video about the top 5 hedge fund stocks right now. All of these stocks had positive returns in 2020.

Video: Top 5 Stocks Among Hedge Funds

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 10 most profitable companies in the world to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our website:

Disclosure: None. This article is originally published at Insider Monkey.