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Strategies & Market Trends : Value Investing -- Ignore unavailable to you. Want to Upgrade?

To: Grommit who wrote (10717)	6/13/2000 2:25:00 AM
From: Paul Senior	Read Replies (1) \| Respond to of 78666

Grommit, I'll consider your purchase of RGC an affirmation of the undervalued nature of this stock. Though of course, I've been wrong many, many times before -g-. ROST and SKS. Ross is tough for me. I went back and looked at it and at Mike Burry's writeup. I have been following Saks (SKS) for several months. Saks looks to be the mirror image of ROST. Ross has wonderful returns on equity and returns on assets. (Done without LTD) Good sales and earnings growth. SAKS has none of this. (aside: I believe SKS sales 'growth' is due to mergers-- unlike the recent same store sales growth which ROST delivers.) I just do not know what is key here in evaluating these retailers. I'll guess it's sales growth (ROST has it, SKS does not) and maybe, p/e expansion. Neither company has been awarded a consistently higher p/e. SAKS has sold in each of the past five years for higher p/e 's (although on lower absolute earnings), higher price/sales and higher price/book (which may be a meaningless ratio for these retailers.) If I buy Saks now I would be betting that the stock would or could -somehow- return to those higher numbers. With ROST, the current price/sales, p/e, price/book is maybe midway where it's been in the past few years. On that basis, to me, the stock is still not valued as inexpensively as SAKS. Anecodatally, I've shopped at Saks and its Bergdorf Goodman stores in NYC and in Southern California. Some stores (NYC) are crowded with shoppers, other stores seem dead. And I've shopped at ROSS. With ROSS, maybe it's their great back office or buying ability. The stuff is nothing that other off-price retailers can't deliver (if I recall). On the other hand, I find empty Saks stores (which could be a function of the time of my trips - 1:30 pm weekday) very sad, and overpriced (imo, of course) "stuff" or "fashion" very off-putting. OTOH again, there may be only 3 large chains peddling to the carriage trade - say Neiman, Nordstrom, and Saks. So the 'brand' may have value. As Mike has noted in his writeup, there's not much insider buying at Ross lately. But for Saks, you do see some in the past few months and at higher prices than the low Saks is flirting with now. Both SKS and ROST have low p/e ratios now and going forward (based on analysts' estimates). I tend to see Saks as a washed out stock in a business that's suffering at least for now (and maybe it is terminal --death by 1000 cuts). I look at ROST, not so much as a value stock like Saks might be, but more like a discarded growth-type stock. And having a business model that requires very close attention to price competition. The sales and earnings growth are still there, but people's willingness to pay for them in a higher stock price apparently is not (for now anyway). Not that it's necessarily a decision to buy one company or the other. I could by both. Or maybe neither. For now, I'm very close to starting a small exploratory position in Saks. fwiw, Paul