What Does Billionaire Dan Loeb See In Tiffany & Co. (TIF)?

Page 1 of 2

Several weeks after the end of each quarter, hedge funds and other major investors file 13Fs with the SEC, which are then disclosed to the general public. We track these filings, using the included information to help us develop investing strategies; for example, we’ve found that the most popular small cap stocks among hedge funds generate an average excess return of 18 percentage points per year (learn more about our small cap strategy). Of course, we also like to review filings from top managers such as billionaire Dan Loeb of Third Point to see what trades they were making. When we look at Third Point’s most recent 13F (see the full list of Loeb’s stock picks), we noticed that the fund initiated a position of 2.7 million shares in Tiffany & Co. (NYSE:TIF) between January and March. This made Third Point the largest shareholder of Tiffany out of the filers we track.

The $10 billion market cap jeweler and jewelry retailer grew its revenue by 9% in its most recent quarter (which ended in April, and was the first of Tiffany & Co. (NYSE:TIF)’s fiscal year) compared to the same period in the previous fiscal year. Comparable store sales were up moderately with some growth coming from an increased number of locations. However, with costs rising as well, earnings per share were only up by a penny to 65 cents. Sales growth occurred in all four major geographies, with the highest growth rate (of 15%) occurring in Asia-Pacific (a segment which excludes the much slower-growing Japan). Growth rates were also high in the Middle East, though that is still only a small source of business for Tiffany & Co. (NYSE:TIF).

Dan Loeb Third PointIts current market capitalization places Tiffany at 23 times trailing earnings, which seems aggressive considering how low net income growth was last quarter. Analyst growth expectations imply a forward P/E of 19, suggesting that investors are quite optimistic about the company’s prospects over the long term. We’d note that as a provider of jewelry Tiffany & Co. (NYSE:TIF) tends to be dependent on the prosperity of the overall economy, as shown by its beta of 1.9. Chilton Investment Company, managed by billionaire Richard Chilton, reported ownership of about 730,000 shares in its own 13F (find Chilton’s favorite stocks).

The closest peers for Tiffany & Co. (NYSE:TIF) are Signet Jewelers Ltd. (NYSE:SIG) and Zale Corporation (NYSE:ZLC). Zale Corporation (NYSE:ZLC) has risen over 250% in the last year, as the company has broken into the black. Its market capitalization is only about $300 million, but with a current price of over $9 and close to 700,000 shares traded per day there should be sufficient dollar volume. It trades at 23 times forward earnings estimates. Signet Jewelers Ltd. (NYSE:SIG) is somewhat closer to value territory than either Zale Corporation (NYSE:ZLC) or Tiffany, with trailing and forward P/Es of 15 and 13 respectively. With double-digit percentage increases on both top and bottom lines last quarter compared to a year ago, we think it is worth a closer look from investors.

Page 1 of 2
Comments
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months. Our beta is only 1.2 (don't click this link if beating the market isn't important to you).

Lists

The 10 Most Expensive Law Schools in the US

The 10 Best Wall Street Movies

The 10 Most Expensive Golf Clubs Ever Sold

The 10 Most Expensive Golf Memberships

The 10 Best Disney Characters Ever Created

The 8 Best Foods for Gaining Weight

The 10 Most Expensive Colleges in the World

The 7 Most Memorable Ad Campaigns of All Time

The 7 Most Expensive High Schools in the World

The 10 Electric Vehicles with the Longest Range

The 10 Cities with the Worst Drivers in the World

The 10 Most Expensive Dresses Ever Created

10 Islands to Visit Before You Die

10 Famous Celebrities Who Needed Rehab

The 15 Countries with the Largest Oil Reserves

The 10 Most Overused Excuses in the World

The 5 Best iOS Apps You Can’t Get on Android

5 Companies Damaged By Social Media Blunders

The 10 Most Legendary Blues Songs

The 10 Most Lawless Places in the World

4 Reasons China is a Threat to the US

The 17 Most Sugary Drinks in the World

The 10 Most Ruthless Rulers in History

The 10 Greatest Generals in History

Top 8 Travel Destinations for 2015

The 10 Safest Dog Breeds for Children

The 10 Most Stolen Vehicles in the US

The 7 Most Expensive Celebrity Weddings

The 10 Best LoL Teams in the World

Top 10 Worst Marketing Campaigns Ever Produced

Top 5 Diets that Help You Lose Weight

The 10 Best Ways to Stay Awake

7 Artists That Switched Musical Genres

The 10 Most Expensive Cities to Live in New Jersey

The 10 Best High Schools in New York

The 10 Countries With the Least Gender Inequality

The 6 Biggest Musician-Manager Feuds

The 10 Countries with the Cheapest Gas Prices

The 7 Most Theatrical Bands of All Time

The 8 Worst Band Breakups of All Time

The 10 Most Important South American Leaders

The 7 Most Successful Casting Show Winners

The 10 Most Peaceful Countries in the World

5 Big Reasons Communism Failed

The 15 Most Famous Carl Icahn Quotes

10 Scary Animals that are Actually Harmless

The 8 Most Famous Singer-Actors in Entertainment

The 10 Longest Wars of All Time

The 13 Worst Looking Foods that Taste Great

The 6 Most Gruesome Injuries Suffered During a Sports Match

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!