Egg-cellent. Carolyn found the pantyhose in an ovoid plastic container, sold in supermarkets, and Peter invested in the manufacturer, Hanes Corp. “It turned out to be a six-bagger,” he wrote, meaning that Lynch’s investment in Hanes sextupled in value before the company was acquired. Lynch essentially was making the same point that Yogi Berra once did: “You can see a lot just by looking.” And nowhere is looking a more powerful tool than in retailing.
Unfortunately, many of the best retailers, including Neiman Marcus, Toms Shoes and J. Crew, are privately owned. But that leaves scores of smaller retail chains for you to ferret out.
As for what my own eyes have seen, the world has two great luxury retailers. The first is Hermès International (HESAY), which has perfected the art of charging high prices by limiting the supply of hugely desirable items. With 25 stores in the U.S. and another 300 in other countries, the Paris-based company charges $10,000 and up for its Birkin handbags, and the waiting list for these and other hot products is often more than a year. The company swatted away the 2007–09 recession like a pesky mosquito. Revenues have doubled since 2007, and profits rose from 288 million euros to 740 million euros (about $979 million).
Another consumer favorite is Destination Maternity (DEST), which owns A Pea in the Pod and other chains (a total of 606 stores) for expectant mothers. At $30, the stock is well priced and delivers an above-average dividend yield of 2.5%.