B/E Aerospace Inc (BEAV), Tiffany & Co. (TIF): Dan Loeb’s Leading Picks for the Long Run

In the first quarter of 2013, Dan Loeb seemed to be B/E Aerospace Inc (NASDAQ:BEAV) bullish on the aerospace & defense industry as well as the jewelry retail industry. He bought 2 million shares of B/E Aerospace Inc (NASDAQ:BEAV) and 2.7 million shares of Tiffany & Co. (NYSE:TIF). Tiffany & Co. (NYSE:TIF) B/E Aerospace Inc (NASDAQ:BEAV) positions accounted for 3.5% and 2.3%, respectively, of his total portfolio as of March 2013. Let’s take a closer look at these two companies to determine their attractiveness.

B/E Aerospace – a cash cow and a global leader in the aerospace industry

B/E Aerospace Inc (NASDAQ:BEAV) is considered the global leader in cabin interior products for commercial aircraft. It also distributes aerospace fasteners and provides logistic services to aerospace industries. The company operates in three main business segments: Commercial Aircraft, Consumables Management, and Business Jet.

Most of its revenue, $1.55 billion, or 50.2% of the total revenue, was generated from the Commercial Aircraft segment, while the Consumables Management segment ranked second with $1.17 billion in sales. The Commercial Aircraft segment was also the biggest earnings contributor, with $271.3 million in profits in 2012 while the operating earnings of the Consumables Management and the Business Jet segments were $216.7 million and $52 million, respectively. B/E Aerospace Inc (NASDAQ:BEAV)’s biggest customer was The Boeing Company (NYSE:BA), accounting for 11.1% of its total net sales.

In the past five years, B/E Aerospace Inc (NASDAQ:BEAV) has generated consistently positive cash flow. While the operating cash flow increased from $116 million in 2008 to $355 million in 2012, the free cash flow nearly tripled from $84 million to $230 million. The market values the company quite expensively at 12.30 times EV/EBITDA.

Tiffany – a global leader in jewelry retailing

Tiffany & Co. (NYSE:TIF) is a famous jewelry and specialty retailer in the U.S., operating around 275 retail locations in the Americas, Asia-Pacific, Japan, and Europe. Most of its revenue, or 30% of the total 2012 revenue, was generated via sales of silver, gold & RUBEDO metal jewelry. Engagement jewelry & wedding bands sales ranked second, accounting for 29% of the total revenue in 2012. Tiffany & Co. (NYSE:TIF) turned in a great operating performance with high comparable store sales growth of 16% in 2011. However, it seems to be sluggish this year, with comparable store sales staying flat due to the decline in Americas and Europe, offsetting by the increase in Asia-Pacific and Japan.