Billionaire Steve Cohen’s SAC Bought Shares of Carter’s

A 13G filed with the SEC has reported that billionaire Steve Cohen’s SAC Capital Advisors has increased its holdings of Carter’s, Inc. (NYSE:CRI) to just over 3 million shares, giving the hedge fund ownership of 5.1% of the children’s apparel company. Carter’s owns brands including Carters, Child of Mine, and Oshkosh. Since we track 13F filings from hedge funds such as SAC as part of our work developing investment strategies (we have found, for example, that the most popular small cap stocks among hedge funds outperform the S&P 500 by 18 percentage points per year on average), we can see that Cohen and his team had a little over 1.3 shares in their portfolio at the beginning of January if we count the Sigma Capital Management subsidiary. Therefore we can see that most of these shares were bought since the beginning of 2013. Find Cohen’s favorite stocks from the 13F.

In the fourth quarter of 2012, Carter’s, Inc. grew its sales by 14% versus a year earlier. This was about in line with revenue growth earlier in the year; the two largest contributors to the improved top line were sales at its Carters retail segment and international operations. Cost of goods sold was actually held down nicely, and even though SGA expenses did growth the company ended up recording 41% earnings growth for the year, nearly matching the results for Q4. Cash flow from operations more than tripled.

The market is pricing in some degree of continued growth at Carter’s, Inc., with the stock trading at 21 times trailing earnings given the market capitalization of $3.4 billion. Analyst expectations are in agreement, with consensus for 2014 implying a forward P/E of 15 and earnings projections even further out showing a five-year PEG ratio of 0.9.

Billionaire Andreas Halvorsen’ Viking Global was the largest holder of the stock in our 13F database for the fourth quarter of 2012, reporting a position of 3.7 million shares (see Halvorsen’s stock picks). Hoplite Capital Management, which is managed by former Viking Global employee John Lykouretzos, increased its holdings by 54% to nearly 3 million shares (check out more stocks Hoplite was buying). Christian Leone’s Luxor Capital Group initiated a position of 1.6 million shares between October and December. Research more stocks Leone likes.

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