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Bill Miller Sparks Rally in Groupon and Aeropostale's Forecast Dissapoints

March 15, 2013 | About:
U.S. equity are mixed in early trading as the Dow Jones Industrial Average (DJIA) will look to close green and set a new closing record for the 11th consecutive day — by far the longest streak in recent memory.

At the same time, the S&P 500 is trying to reach record territory and will look to set to new records. Keep an eye on inflation as factory orders bounced back in February and the Consumer Price Index (CPI), an index used to measure inflation, increased 0.7, the largest gain since 2009. Prices at the pump accounted for about three-fourths of the increase.

Shares of Groupon (GRPN) jumped after legendary investor Bill Miller mentioned on CNBC he is bullish on the stock at current levels. Miller told CNBC Groupon has “$1.2 billion in cash, no debt and is cheap.” His cost is about $5 which is near where the stock currently trades.

Groupon recently reported a horrible quarter and a forecast that was well below analyst expectations that sent the stock tumbling and eventually led to its CEO getting fired. I understand Miller sees some kind of value as Groupon currently has a $3 billion market cap, $1.2 billion in cash, and $99 million in operating income, but the company is facing some stiff competition and there are signs that growth is slowing. To combat slowing growth, Groupon has started taking a smaller “cut” from merchants as it tries to retain current customers and attract new merchants.

Gurus have been selling out of Groupon. Those selling out in the last two quarters include:

The lone bull to pay attention to is Chase Coleman as he made a huge purchase in the last quarter that had a positive 5% impact to the Tiger Global portfolio or about 10% of Groupon’s shares outstanding.


Retailer Aeropostale (ARO) reported fourth quarter EPS of $0.24 versus analyst estimates of $0.22. Shares are under pressure after the teen retailer said it would report a loss and a drop in sales in the first quarter due to the weak economy. The company also said it would have to reduce its prices to offset the decline in sales. Shares are down about 10% in early trading.

It has been a mixed bag between Gurus and the teen retailer. Those Gurus adding to an existing position in the last quarter include:

The Gurus who sold out or reduced their position include:

About the author:

I'm in love with value investing and in particular Joel Greenblatt's "magic formula". I run a well diversified portfolio

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