Unlocking Value in the Retail Sector Despite Struggling Divisions Within Companies: Expert Money Managers Marshall Kaplan and Steven Howard Share Their Top Retail Picks with The Wall Street Transcript

Wall Street Transcript

67 WALL STREET, New York - August 7, 2013 - The Wall Street Transcript has just published its Deep Value Investing and Other Strategies Report offering a timely review of the sector to serious investors and industry executives. This special feature contains expert industry commentary through in-depth interviews with Money Managers. The full issue is available by calling (212) 952-7433 or via The Wall Street Transcript Online.

Topics covered: Bottom-Up Stock Selection - Value Oriented Strategy - Value Investing - Deep Value - Small Cap Investing

Companies include: ConAgra Foods, Inc. (CAG), Teleflex Inc. (TFX), AnnTaylor Stores Corp. (ANN), Thermo Fisher Scientific, Inc. (TMO), Life Technologies Corporation (LIFE) and many more.

In the following excerpt from the Deep Value Investing and Other Strategies Report, expert portfolio managers discuss their portfolio-construction methodologies and investment philosophies:

TWST: Would you provide us with a few examples of stocks that you believe are really representative of your approach?

Mr. Kaplan: We are not thematic investors per se, and avoid relying on one particular sector or theme. However, there are certain situations that attract us. We've had success over the years identifying companies that have, for all intents and purposes, operated successfully with the exception of one subsidiary or division. Oftentimes, that struggling division dominates the headlines, which hurts the valuation of the company and creates negative investor sentiment. Many times, we feel that these stocks can be candidates for our portfolio.

If you think about it, there are only a handful of outcomes regarding a division that is struggling. First, management can fix the division; second, management can sell the division; third, management can fix the division and then sell it; fourth, the division can be spun off, thereby raising the valuation of the remaining, healthy company; and finally, the division's management can be replaced. We have found that any one of these outcomes can unlock value for investors. Many times, you find this type of situation prevalent in the retail sector. There are two such opportunities right now that we believe have attractive valuations.

One name is Ascena Retail Group (ASNA), formerly known as Dress Barn. In addition to the Dress Barn division, there are several divisions. One is Maurices, which caters to females age 17 to 34, and another is Justice, which is a retailer for tweens, where the target customer is 7 to 14 years of age.

Justice, over the last several years, has shown very impressive comparable sales. Two newer divisions came to ASNA via the acquisition last year of Charming Shoppes. These are Lane Bryant and Catherines, which cater to plus-size women. Like other...

For more of this interview and many others visit the Wall Street Transcript - a unique service for investors and industry researchers - providing fresh commentary and insight through verbatim interviews with CEOs, portfolio managers and research analysts. This special issue is available by calling (212) 952-7433 or via The Wall Street Transcript Online.

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