Working Capital Advisors, a major holder of Stitch Fix (SFIX), recently picked up 500,000 more shares. The buy increased the fund’s stake by nearly 4.4 percent, and came to a total price of just under $8.2 million.
This adds to a number of buys from the fund over the past two months, including a pickup of nearly 3.4 million shares in mid-December. These buys have occurred as shares have had a major slump in the past year.
Overall, company insiders own about 3.5 percent of company shares, and institutions own about 91 percent, leaving few for individual investors.
Many may still want to shy away, as the stock is a staggering 80 percent off its 52-week high. However, the company is close to profitability, and managed to raise revenues by nearly 19 percent in the past year.
Action to take: With large scale buying from a major fundholder already, shares look like a counterintuitive buy here. Even a partial recovery from last year’s slide could lead to market-beating returns in shares in the coming months.
Given how shares have been sliding for months, a recovery will likely take time as well. Traders should consider the June $17.50 calls. Last going for about $2.50, a sustained move higher in the coming months could lead to mid-to-high double-digit returns for investors.
Disclosure: The author of this article has no position in the company mentioned here, but may trade after the next 72 hours. The author receives no compensation from any of the companies mentioned in this article.