Wednesday, January 30, 2008


The WSJ’s “Heard on the Street” column out saying that some investors have begun circling retailing stocks like shoppers clawing at the bargain bin. Activist investor Nelson Peltz boosted a stake in Tiffany (TIF) to 7.9%, mostly with purchases since the yr began. Richard C. Breeden bought more shares in Zale (ZLC) and then joined the co's board. William Ackman, an activist investor with stakes in Sears (SHLD) and Target (TGT), has increased his exposure to Target through stock swaps that let him rack up gains or losses on the stock without actually holding shares. Icelandic retail behemoth Baugur Group and its billionaire exec chmn, who hold 8.5% of Saks (SKS), are preparing a bid for the entire co. Carl Icahn announced at an industry dinner Jan. 14 that, with their shares falling off the rack, retailers are attractive investments. Mr. Icahn acknowledges that his timing could be off. "I am not bullish on the economy, and it certainly could get a lot worse before it gets better," he said in an interview, adding that retail shares, in particular, "might well go lower" before they go up. Yesterday, Barington Capital Group and Clinton Group reported that they have snapped up a 5.32% stake in Dillard’s (DDS). Barington chastised the co and called for change. Last week, Sanford C. Bernstein upgraded the US retail sector to the equivalent of Buy from Hold, saying retailing stocks have underperformed the broader mkt for the last 3 yrs. Many retail stocks, including Macy’s (M) and JC Penney (JCP), rose last week. Part of the reason investors are piling in is that the retail sector has been battered more than other stocks. Some retailers, including Coach (COH) and Target, now have forward P/E ratios near their historic lows. Retailers also tend to generate strong cash flow, and some have attractive real-estate holdings.

“Inside Track” section reports that President and CEO of Luby’s (LUB), Christopher J. Pappas, and his brother, COO Harris J. Pappas, bought a total of $5.4m in shares of the co last week, just one week after shareholders favored mgmt-backed board nominees over candidates supported by an activist hedge fund. After the latest stock purchase, the brothers hold a combined stake of 28.6% in Luby's.

Barron’s Online highlights Intel (INTC), saying that though its shares have lost a quarter of their value in just 3 mo’s, it is actually sitting pretty. Despite its hefty size, Intel will likely generate double-digit annual earnings growth over the next 3-5 yrs. And its main competitor, AMD (AMD), is on the ropes. It's a good bet that Intel will extend its already sizable lead in PC microprocessors at the expense of AMD, especially if the economy weakens further. If Intel does gain share against AMD, it could offset a weakening outlook for PCs and lead to upside in Intel's earnings. At a recent price of about $20, Intel trades at just about 12x ’09 EPS. If Intel can achieve the earnings multiple closer to the 15x that the S&P500 garnered most of last yr, its shares would appreciate by about 20%. After cutting headcount by 14% in 2 yrs, shaving costs and moving to more efficient manufacturing of its chips, Intel is a leaner machine that's poised to benefit as rapid growth in emerging mkts help PCs grow at double-digit rates this yr. "So far we haven't seen any evidence that suggests that PCs are falling off a cliff," says Paul Wick, of J&W Seligman.

1 comment:

Shadi said...

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