Billionaire Steve Cohen’s SAC Up To 5.3% of Ann Inc

SAC Capital Advisors, managed by billionaire Steve Cohen, has reported a position of 2.6 million shares in Ann Inc (NYSE:ANN) or 5.3% of the total shares outstanding, according to a filing with the SEC. The fund crossed the 5% ownership threshold on March 5^th, before the company announced strong Q4 earnings on March 8^th which as of this writing have the stock up 7% on the day. 13D and 13G filings are not as comprehensive as quarterly 13F filings, and so it is more difficult to develop profitable investment strategies based on the included information (using 13Fs, for example, we have found that the most popular small cap stocks among hedge funds produced an excess return of 18 percentage points per year). However, they are more timely and we think many investors can benefit from seeing what top managers such as Cohen have recently bought and then doing more research to see if the stock is a good fit for their own portfolio. This is similar to how many investors use stock screens.

Ann Inc is a $1.5 billion market cap retailer of apparel and accessories for women. Its fiscal year ended in early February, with sales for the year up 7% from the previous one; the fourth fiscal quarter showed the same rate of revenue growth. According to the company, comparable sales were down slightly for the quarter. Earnings have also been up: the Q4 numbers were 9% higher than in the quarter ending January 2012, which was a slowdown from earlier in the fiscal year. EPS for the year were $2.10, which places the current price- even with the current runup- at 15 times trailing earnings. That price is generally right for companies which are experiencing low earnings growth.

At the end of December SAC had owned about 540,000 shares of Ann Inc after cutting its stake by 43% in the fourth quarter of 2012 (see Cohen’s stock picks). So Cohen and his team were buying nearly all of their shares in the last two months. Renaissance Technologies, whose founder Jim Simons is now a billionaire, had also been selling shares but was the largest holder of the stock in our database at that time with a position of a little less than 1 million shares (find Renaissance’s favorite stocks). Brett Barakett’s Tremblant Capital– the only other fund we track which had over $16 million invested in the stock- also reduced its position.

How does Ann measure up against its peers?

We would compare Ann to Fifth & Pacific Companies Inc (NYSE:FNP), Chico’s FAS, Inc. (NYSE:CHS), Macy’s, Inc. (NYSE:M), and Limited Brands, Inc. (NYSE:LTD). We see most of these peers trading at premiums to Ann’s stock on an earnings basis. In the cases of Chico’s and Limited Brands the gap is quite narrow, with those two companies posting trailing earnings multiples in the 16-17 range. With analysts expecting growth over the next couple years, forward P/Es are closer to 12 or 13. Both reported double-digit earnings growth rates in their most recent fiscal quarter versus a year earlier; it’s possible that they are good values or even better values than Ann. Macy’s carries a trailing P/E of 13, but the department store has been struggling in terms of business performance and net income has actually been down when we look at its last quarter. Fifth & Pacific is unprofitable on a trailing basis, having just broken into the black in the fourth quarter of 2012. Its sales have been up at a similar rate to many of these peers, but the valuation is high in terms of earnings and so we would avoid it.

Ann and some similar companies seem well priced in terms of their trailing earnings, and recent results have been good (including the recent quarterly report from Ann itself, though its earnings did lag those of companies like Chico’s and Limited). Those three companies could be good targets for further research.

Disclosure: I own no shares of any stocks mentioned in this article.