Why Has Billionaire Jim Simons Been Slipping? – Bristol Myers Squibb Co. (BMY), Microsoft Corporation (MSFT)

Coach, Inc. (NYSE: COH), the high end accessory retailer, fell almost 30% from the end of the first quarter to the third quarter. Just as Coach was in decline, Simons was making big bets on the company, upping his shares owned by 150% during the second quarter. During the third quarter, the retailer rose to $62 before falling to $49. After the decline, Simons sold off 80% of his shares, but the damage had already been done.
The company was in steady decline in 2012 due to a tough economic environment, which has led to a tightening of consumer spending. Recently, the stock took a 10% nose-dive after releasing earnings last quarter. The company continued to blame the broader economy and conditions for the poor earnings release. The one bright spot for the company is international results and outlook. International sales were up 12% last quarter on a year over year basis, with China being the stronghold. The Chinese segment saw sales up 40% and this should be a key part for its expected rebounding performance. Wall Street estimates have EPS expected to grow 13.5% annually over the next five years.
Another stock that took a big hit during 2012 was the semi-fast-food chain Chipotle Mexican Grill, Inc. (NYSE: CMG). At the end of the second quarter Chipotle was Simons’ fifteenth largest holding, with over 630,000 shares owned. During this quarter the stock tanked 15%. Yet, Chipotle’s stock may well offer investors solid growth, not to mention a debt-free balance sheet. Economic headwinds and poor consumer-spending has put pressure on the stock. However, the fast-food retailer does have industry leading comp sales, and management has been concentrating on improving its workforce, introducing a new loyalty program and higher food quality. All of these things should help drive the 20% annual earnings growth expected by Wall Street analysts.
Don’t be fooled.
Bristol and Microsoft both pay solid dividends, and appear to be value plays. I would consider making a bet on their rebound in 2013, just as it appears that Simons is doing. Intel remains a questionable play; the stock’s exposure to the PC market has put the earnings visibility in question, and so I remain cautious on the tech giant. Coach’s prospects are not quite as questionable as Intel, but I remain on the sidelines given the stock’s over-dependence on the high-end consumer market. Chipotle’s decline has brought its valuation to a much more intriguing level, and I continue to like the company’s prospects (read more about Simons’ top picks).
The article Why Has Billionaire Jim Simons Been Slipping? originally appeared on Fool.com and is written by Marshall Hargrave.
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