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INVESTORS BET ON US CONSUMER LOOKING PAST WAR, SOME EXPECT UPTICK IN RETAIL, CASINO, TRAVEL- RELATED STOCKS
[THIRD Edition]
Boston Globe - Boston, Mass.
Subjects: Iraq War-2003; Investment; Consumer spending
Author: Caffrey, Andrew
Date: Mar 23, 2003
Start Page: C.1
Section: Business
Abstract (Document Summary)

[Brian Bruce] likes Cendant Corp. of New York, which owns hotels, car rental agencies, and travel companies. Bruce said Cendant's stock, at around $14 a share, is cheap compared to its earnings potential. Even in the present climate, analysts say, Cendant's profits will grow 40 percent this year because of restructurings and a low interest-rate environment that boosts its financial and real estate services companies. Yet Cendant trades at less than 10 times expected earnings of $1.45 a share. Cendant may not be for the timid, as the company is trying to rebuild its reputation after an accounting scandal in 1998 that cost it more than $2.8 billion in legal settlements. Two former executives have been charged with fraud and insider trading. One way Cendant may earn investors' faith: The company says it would consider paying a dividend.

A favorite of hedge fund manager Shawn Kravetz is Chico's FAS Inc., a Fort Myers, Fla., retailer that sells casual upscale women's clothes. With an earnings multiple of about 21, the stock is a tad expensive, but Chico's sales have increased at a time when many retailers are losing business. An earnings multiple - a measure of a company's share price compared to anticipated earnings - is used by investors to gauge how expensive a stock is. Stocks with multiples above 15 or 20 are usually viewed as expensive and below 10 as cheap.

Kravetz, who runs Esplanade Capital in Boston, is also bullish on cheap casino stocks, which he bets will come up lucky if a short, successful war encourages gamblers and tourists to return to casinos. Moreover, budget pressures have prompted many states, including Ohio and Pennsylvania, to consider legalizing casino gambling. One of Kravetz's favorites is Boyd Gaming. Analysts project the Las Vegas company's earnings to grow 12 percent this year, but its multiple is less than 12. A potential upside for the stock: Boyd is half-owner of a Vegas-style mega-casino coming to Atlantic City. If that is successful, Kravetz calculates, it could be worth an extra $6 a share to Boyd. Kravetz won't disclose his holdings.

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