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Market Perform - Price 5.01 on June 10
by FBR Capital Markets

We're downgrading [clothing-retailer] Talbots's shares to Market Perform, as our near-term catalysts have played out, and the stock has [hit] our price target. When we upgraded shares on May 20, we pointed to a risk/reward analysis with two near-term catalysts: potential for a short-squeeze on any potential good news into the earnings call and the potential sale of [clothing brand] J. Jill, which would relieve significant overhang on the story, as well as cash drain. [We believe both have since occurred.] Since our May 20 upgrade, TLB shares are up approximately 57.5% versus the...[Standard & Poor's 500 index], up 4.3%. At this point, following the recent run-up, the shares are trading higher than the sector averages at 0.7 times [enterprise value]/sales and 12.3 times EV/Ebitda versus the sector averages of 0.4 times EV/sales and 7.2 times EV/Ebitda. Market cap: $277 million.

Then I fret that who the heck is going to lend the retailers money to hold down inventory for Christmas, and I see the prices of Liz Claiborne (LIZ) and Talbot's (TLB) and Ann Taylor (ANN) and Nordstrom (JWN) and J.C. Penney (JCP) and Abercrombie & Fitch (ANF) and Sears (SHLD) -- oh man, Sears -- and I think that these are all better than any of the newly private companies like Neiman Marcus, and I know bankruptcies are around the corner.

When Warren Buffett says stocks are cheap, or Jeremy Grantham or Steve Leuthold or Jeremy Siegel, it's very heartening. You just want to go out there and buy cheap stocks like CBS (CBS) and Williams-Sonoma (WSM) and Ann Taylor (ANN) and Talbots (TLB).

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Talbots (TLB) was upgraded from Sell to Hold, Citigroup said. Stock is down 40% for the year, and is discounting the company's cautious outlook. $16 price target.