Billionaire Steve Cohen Bets Big on Ann Taylor – Ann Inc (ANN): The Gap Inc. (GPS), Limited Brands, Inc. (LTD)

Price to Sales

Ann 0.6
The Gap 1.1
Nordstrom 0.9
Limited Brands 1.3
Fifth & Pacific 1.4

Price to Operating Cash Flow

Ann 8.6
The Gap 10.8
Nordstrom 9.5
Limited Brands 12.6
Fifth & Pacific 600

I’m also impressed by the retailer’s gross profit margin…

Ann 58%
The Gap 43%
Nordstrom 43%
Limited Brands 45%
Fifth & Pacific 56%

Assuming investors take notice of Ann’s growing market share the stock should trade more in line with its peers. If Ann manages to see multiples expansion to the extent that the stock trades at the peer average of 1.2 times sales, the upside could be upwards of 100% based on 2012 sales.

Don’t be fooled

It appears that SAC Capital and Cohen have found an interesting buy in a fragmented apparel retail business (see all of Cohen’s stocks). Ann is one of the cheapest stocks in the industry, but also has a very robust gross profit margin at 58%. Although Ann’s focus on women’s apparel limits its customer base, let’s face it, the majority of clothing shoppers are women. With solid upside potential it’s hard not to like Cohen’s latest investment in Ann.

Billionaire Steve Cohen Bets Big on Ann Taylor – Ann Inc (ANN): The Gap Inc. (GPS), Limited Brands, Inc. (LTD)

Published on March 18, 2013 at 8:58 pm by The Motley Fool in Hedge Funds

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