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

Published on May 23, 2013 at 11:37 am by The Motley Fool in Hedge Funds

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Tiffany & Co. (NYSE:TIF) is known for consistently increasing its dividend. It has raised its dividends from $0.19 per share in 2003 to $1.25 per share in 2012. Interestingly, the dividend policy seems to be quite reasonable as the company only pays more than a third of its earnings in dividends. What I like about the company is its conservative capital structure. As of January 2013, it had nearly $2.6 billion in equity, $505 million in cash, and more than $1 billion in debt. The market values Tiffany & Co. (NYSE:TIF) at a double-digit EV multiple of 11.82.

Tiffany & Co. (NYSE:TIF) is still valued cheaper than one of its peers, The Swatch Group Ltd. (VTX:UHR). Recently, The Swatch Group Ltd. (VTX:UHR) made an aggressive expansion with the acquisition of Harry Winston Inc., one of the most prestigious diamond dealers in the world. The total deal was worth around $1 billion, comprising $750 million in cash and $250 million in debt. After the deal, The Swatch Group Ltd. (VTX:UHR) would own 25 jewelry boutiques and 190 points of distributions for its premium watches. The deal valued Harry Winston at quite a high EBITDA multiple of 23. However, according to Financial Times, an analyst commented that if Harry Winston Inc.’s margin could increase from 10% to 25%, it would be quite an attractive deal for The Swatch Group Ltd. (VTX:UHR).

The EV multiple did not sound rich compared to the LVMH (BIT:LVMH)’s acquisition of BULGARI SPA – A SHS (OTCMKTS:BULIF) for around €3.7 billion at an EV multiple of 21. The Swatch Group Ltd. (VTX:UHR) is trading around $30.80 per share with a total market cap of $33.25 billion. The market values Swatch Group Ltd. (VTX:UHR) at around 12.3 times EV/EBITDA.

My Foolish take

I personally think that Dan Loeb is interested in B/E Aerospace and Tiffany due to their market leading positions although both of them are valued at double-digit EV multiples. These two stocks could be considered decent investments for the long run.

The article Dan Loeb’s Leading Picks for the Long Run originally appeared on Fool.com is written by Anh HOANG.

Anh HOANG has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Anh is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.