Being the cheapest stock held by a fund family may not sound like much of an endorsement. But Wendell Perkins, equities director for the Johnson Family Funds has faith that fortunes will improve for Tommy Hilfiger (TOM).
Tommy Hilfiger's label is well-established in the fashion world, and the clothes, while sometimes trendy, aren't cheap. However, in the late '90s the company made the mistake of following other designers into retail. "That really didn't work out for most of them," says Perkins, and certainly not for Tommy. But the company was quick to get out of its money-losing retailing business and once again focus its efforts on design, which should boost margins again, Perkins says.
Trading at less than half its book value and just five times estimated 2003 earnings of $1.27 per share, the stock is still in the bargain bin. Perkins doesn't worry that Tommy will go out of business. It has nearly $400 million in cash, and if the company were to really get in trouble, he says, it could easily sell its brand name.
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