Bruce Berkowitz (Trades, Portfolio) of Fairholme Capital Management increased his position in Lands’ End Inc. (LE, Financial) by 11.8% on Sept. 30.
Berkowitz founded Fairholme Capital Management in 1997. He manages a concentrated portfolio in companies that have great management, generate free cash flow and are undervalued. He also will invest in mediocre companies that are trading at a significant discount to their intrinsic values but also have potential catalysts.
The guru purchased 353,200 shares for $14.5 per share. The transaction had an impact of 0.35% on the portfolio. He now owns 3,352,627 shares.
Lands’ End is a clothing retailer known for its outdoorsy apparel. Recently, the company’s CEO stepped down after serving for a year and a half. The company was founded in 1963 and is headquartered in Dodgeville, Wisconsin.
Lands’ End has a market cap of $477.6 million with an enterprise value of $743.7 million. It has a price-book (P/B) ratio of 1.3 and a price-sales (P/S) ratio of 0.35.
GuruFocus ranked the company’s financial strength 5 of 10. Its Piotroski F-Score of 4 suggests the company is in stable financial condition. However, its Altman Z-Score of 1.7 is in the distress zone, which indicates the possibility of bankruptcy in the near future. The Beneish M-Score of -2.5 suggests the company is not a manipulator of its financial records. The company’s cash-debt ratio of 0.43 is below the industry median and ranks below 63% of other companies in the global specialty retail industry.
GuruFocus ranked Lands’ End’s profitability and growth 4 of 10. Both the company’s operating margin and net margin are negative and underperform 84% and 82% of competitors. The company’s return on equity (ROE) of -9.2% underperforms 84% of other companies in the industry. Its return on assets (ROA) of -2.7% underperforms 81% of other companies. Similarly, the return on capital (ROC) of -10.6% underperforms 86% of competitors.
Edward Lampert (Trades, Portfolio) is the company’s largest investor among the gurus. Berkowitz is the second largest with 9.4% of outstanding shares, which is 3.4% of his total assets managed. Other gurus invested in Lands’ End are Robert Olstein (Trades, Portfolio), Chuck Royce (Trades, Portfolio), Murray Stahl (Trades, Portfolio), Steven Cohen (Trades, Portfolio), Joel Greenblatt (Trades, Portfolio) and the Fairholme Fund (Trades, Portfolio).
Lands’ End is one of four retail-apparel and specialty stocks in Berkowitz’s portfolio. The others are all part of Lands’ End’s parent company, Sears. They are Sears Holdings Corp. (SHLD, Financial), Sears Canada Inc. (SRSC, Financial) and Sears Hometown and Outlet Stores Inc. (SHOS, Financial). He reduced his position in Sears Holdings by 0.04% on Oct. 7. The consumer cyclical sector has a 35.8% weight on his portfolio.
The DCF Calculator gives the stock a fair value of $-12.2; it was trading at $14.98 on Wednesday.
Disclosure: I do not own stock in any companies mentioned in the article.
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