Tuesday, February 19, 2008

Hedge Funds Corral American Apparel



American Apparel (AMEX: APP) shares are being widely fielded by hedge funds. SEC 13G filings (which indicate that an investor or fund has amassed >5% ownership stake in a publicly traded entity) have been filed by Morgan Stanley Investment Management, Fir Tree, and most notably, SAC Capital Advisors.

SAC Capital Advisors is run by the ├╝ber-successful fund manager Steven Cohen, who routinely pays himself upwards of half a billion dollars a year (and more than a billion in 2005) for managing the fund, and is the 47th richest American, according to the latest figures. More importantly, Mr. Cohen has had a stellar track record investing in retail. Google Finance Board user mlrtist wrote:

"...it might interest you guys to take a quick look back at Cohen's involvement in [youth retailer] Wet Seal's dramatic turnaround exactly 2 years ago."

TheStreet.com - Retail - Wet Seat Turns It Around

Quoting the article from TheStreet.com:

"For S.A.C., Wet Seal has proved to be a huge success. The shares have nearly tripled since the firm bought its stake over a year ago..."

"The results imply that S.A.C., which held a 9.9% stake in Wet Seal as of Dec. 31, found a cheap way to break in on the teen fashion specialty-retail business, where Wall Street darlings like Abercrombie & Fitch, American Eagle Outfitters and Pacific Sunwear have been delivering some of the highest returns in the stock market in recent years. Wet Seal operates about 300 stores across the U.S."

If Steven Cohen tripled his investment in Wet Seal, then we might take a good long look at American Apparel just by association.

(Full disclosure: author owns shares of American Apparel both directly and indirectly at the time of this writing; does not own shares of any other firm mentioned in the article.)

13G Filing - Morgan Stanley

13G Filing - Fir Tree
13G Filing - SAC Capital Advisors

5 comments:

scott-0-bot said...

To what degree will the harassment lawsuit against AA CEO Dov Charney effect business operations? Very slightly. I think AA styles are cool and hip and fresh and in-front-of-the-curve and groovy.

You'll never see me in an AA store because I don't desire to stand out in the AA way.

Cameron Newland said...

Yeah, there is a lot of weird stuff going on with the management over there. I think the crazy stories almost add to the mystique of the place, but we shouldn't downplay the litigation risk that Mr. Charney has exposed the firm to through his, let's say 'nontraditional' management methods.

scott-o-bot said...

first your slapping asses, next thing you know your firm is facing an accounting scandal and your employees go on strike.

mlrtist said...

RE: Scott-o-bot

Dov's employees get paid perhaps the highest average wages in the industry and have more benefits than one would ever expect, including stock in the company, paid time off, healthcare, company-subsidized lunches, bus passes, free English classes, on-site masseurs, free bicycles and on-site bike mechanics, and free parking.

So, yeah... an employee strike would be in the employee's absolute worst interest.

Scott-O-Bot said...

i was half-joking. i maybe should have said - first things are all pez and rootbeer then something happens, your finding hair in your food and the waitress mistakes you for the opposite sex. good to very bad.