Coach, Inc. (COH): Is Luxury Retail Back in Favor?

The hedge fund trade

Going into 2013, hedge fund interest turned negative for Coach, Inc. (NYSE:COH), with 27 hedge funds long the stock, which is a 23% decrease from the third quarter. The major hedgies still invested in the stock include Discovery Capital Management, with a $104 million position that’s 1.5% of its 13F portfolio. Next to Discovery was billionaire Steve Cohen’s SAC Capital, with 0.8% of its portfolio invested in the company. On the flip side was billionaire Jim Simons’ Renaissance Technologies, which dumped the largest position of all the hedge funds (check out Simons’ tech picks).

Meanwhile, at the end of 2012, there were a total of 27 hedge funds also long Tiffany, which was an 8% increase from the third quarter. The top hedge fund manager was billionaire Nelson Peltz’s Train Partners, having a $58 million position that made up 2.4% of its 13F portfolio (check out Peltz’s top picks).

Compared to Coach’s 27 hedge fund owners, Fossil only had 17 going into 2013; however, Fossil’s top hedge fund owner is billionaire Steve Cohen of SAC Capital, with a $147 million position in the stock (see Cohen’s top consumer picks).

Don’t be fooled

Coach, Inc. (NYSE:COH) trades rather cheaply compared to peers and pays investors a 2.1% dividend yield. Coach is trading at only 15.5 times earnings, compared to Ralph Lauren’s 23 times, Fossil’s 17 times and Tiffany’s 22.4 times.

Meanwhile, Coach is an industry leader when it comes to generating returns, based on return on equity and return on assets.

With a rebounding economy and strengthening disposable income, Coach should be one of the big beneficiaries in the industry. Despite its ups and downs over the past twelve months, the recent surge in the stock price could be here to stay.

The article Is Luxury Retail Back in Favor? originally appeared on Fool.com and is written by Marshall Hargrave.

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