I love this quote attributed to Picasso: "Bad artists copy. Good artists steal."

Don't worry. I don't think Picasso endorsed outright theft. What I think he meant was that merely copying the works of others is completely uninspired -- gauche, if you will. However, "stealing" from other artists, taking their style and making it your own by combining it with one's own ideas are what great artists do.

The difference is subtle but meaningful, and the same concept can be applied in investing.

Follow the best
Simply "copying" what other investors buy is not only unoriginal, it's also hazardous to your wealth. Just because Warren Buffett buys the stock of a certain company doesn't mean that you should too. I know that's hard to believe, but it's true.

Still, other investors can be a great source of new ideas. For instance, it's interesting to see who's been buying the dregs of the retailing industry lately. Be advised, though: no copying. The teacher is always on the lookout for cheaters. Instead, let's see which managers motivate us to look deeper into these ideas and make them our own.

Down but not out?
Searching the bottom of the retail food chain -- companies trading more than 25% below their 52-week highs -- I found some of the usual suspects and a surprise or two. And it appears that I am not the only one interested in finding a bargain hiding in the muck.


% Off 52-Week High

Chico's FAS (NYSE:CHS)


Whole Foods (NASDAQ:WFMI)


Pier 1 (NYSE:PIR)


Coldwater Creek (NASDAQ:CWTR)


Finish Line (NASDAQ:FINL)


*Data from CapitalIQ. Price as of 3/30/2007.

Chico's and Coldwater Creek have nice business models: Selling fashionable clothes to ladies with money. The only problem with the model is when these ladies can't find anything they want to buy. That's exactly what happened last year; merchandising miscues turned these beauties into beasts.

Whole Foods is all about the natural and organic food trend that's sweeping the nation. In fact, you could argue that the trend wouldn't be as popular had Whole Foods not been there to create it. Still, it's hard to keep your stock price up when high expectations aren't met.

I can sum up my feelings about Pier 1 in one sentence: it's a turnaround story that has never turned around.

Finish Line sells athletic shoes and apparel to men, women, and children. Too bad that it has not been doing it very well lately. Sales growth slowed and took its toll on profitability.

Bottom feeders
So if things are so bad at these companies, who's interested in buying them? That's the $64 question we want to answer before deciding which ones are worth "stealing" and potentially turning into our own.

Finish Line is the most popular of the bunch, as some big names have poured some serious money into the stock. First Pacific, Sun Capital, Robert Olstein, and Clinton Group collectively own just under 21% of the company. First Pacific was the first one into the pool, disclosing that it owned shares in its March 2005 report to the SEC. Olstein was next to the party. I expect they see something similar to what the Clinton Group noted in a filing to the SEC. But will this turnaround ever actually happen, or will Finish Line end up like Pier 1?

Lee Ainslie of Maverick Capital held true to his fund's name by disclosing in his December 2006 SEC filing that he'd purchased Coldwater Creek shares. I can see the attraction here: good margins and high returns on invested capital. You have to wonder if he missed Chico's in the process or just preferred Coldwater Creek. The Ziff Brothers certainly didn't, as they took a 6.5% stake in Chico's.

Ron Baron backed up his belief in Whole Foods with his money. He increased his fund's stake in the grocer 55% according to his December 2006 filing. Clearly he likes the company's prospects and also likes the company's current price.

No, I didn't forget about Pier 1. I am just not interested in talking about it. But here's a little tidbit: Charles Brandes invested in the company at the end of 2005 and Sun Capital did the same at the end of 2006.

Pass, copy, or steal
I've written plenty about Whole Foods recently, so I won't rehash here. And as you can probably tell, I'm not copying or stealing anything associated with Pier 1. It may have a turnaround in it at some point, but there are too many stronger competitors like Williams-Sonoma (NYSE:WSM) and Bed Bath & Beyond (NASDAQ:BBBY) that attract my interest.

Finish Line is a conundrum. Although I think it has some very nice assets and a good business model, I don't think it's been run very well over the years. It's had too many stops and starts to win the retail race. Last year's filing from the Clinton Group makes me wonder if the company shouldn't be under someone else's control. And that gaggle of great fund managers makes me wonder if much of that future goodness is starting to get priced into the stock. Thus, I don't know exactly what to steal yet, so I think I'll have to keep examining the artwork up close.

Chico's and Coldwater Creek are the ones I find most interesting. Maverick Capital and Ziff Brothers are good value shops and appear to have gotten good prices. But some thumbnail valuations suggest that they are still undervalued. In my opinion, the combination of good investors, good returns, and a reasonable price make me want to see if there's more to steal.

Fool's final word
Remember, copying is totally foolish (small "f"). Just because a great fund manager has made an investment does not necessarily mean that they haven't made a mistake. That's why you should steal from them -- take the idea and make it your own before making a decision. Who knows, you may even get in at a better price.

Bed Bath & Beyond is both a Stock Advisor and an Inside Value recommendation. Both market-beating newsletters are available for a free 30-day trial.

Retail editor David Meier is ranked 763 out of 25,463 in CAPS and does not own shares in any of the companies mentioned. You can view his TMF profile here. The Fool takes its disclosure policy very seriously.