SAC Capital Advisors, managed by billionaire Steve Cohen, filed its 13F for the third quarter of 2012 last month. This filing reported many of its long equity positions as of the end of September. Read more about SAC’s moves in the third quarter. When we went through the 13F filing we noticed that a number of Cohen’s top stock picks were tied to retail. This is an interesting enough trend from a macro perspective, but it’s also worth it to consider which specific picks he and the investment team liked. Read on for our thoughts on SAC’s five largest retail holdings for the third quarter or see all of Cohen’s 13F stock picks.
Tiffany & Co. (NYSE:TIF) was one of Cohen’s top five stock picks for the quarter with a position of 3.2 million shares, a large increase from the fund’s holdings three months earlier. In its most recent fiscal quarter, ending in October, Tiffany’s earnings were down 30% from a year ago despite rising revenue. With the stock price also down over the last year, though slightly, the trailing P/E is 18. Trian Partners cut its stake last quarter but still had 1 million shares in its portfolio; Trian is managed by activist investor (and billionaire) Nelson Peltz (check out Peltz’s favorite stocks). We think that we would avoid it.
Growth play Michael Kors Holdings Ltd (NYSE:KORS) was another of SAC’s retail picks, with the fund adding shares during the quarter. Kors trades at 40 times trailing earnings, but we’d hesitate to call it overvalued as net income more than doubled last quarter versus a year earlier off of a 74% increase in sales. The five-year PEG ratio is 1.1, indicating that analyst estimates have its growth rate high enough over the next several years to come very close to its valuation. We would need to see continued growth from the company, pulling its multiples into more reasonable territory. Otherwise we think that an investment would still be too speculative.