+ Watch DECK
on My Watchlist
The Company is a designer, producer and brand manager of innovative, high-quality footwear and the category creator in the sport sandal, luxury sheepskin and sustainable footwear segments.
This is my highest conviction pick for 2012! This is a truly outstanding business trading at a huge discount to its intrinsic value. The problems the company is experiencing are just temporary and it’s nothing it can’t recover from. Sheepskin prices can’t rise forever and it won’t be an unusually warm winter every year. In the long run, I am very confident that this company will succeed and patient investors will be rewarded.
Bold bet on the UGG brand. I'm not necessarily disagreeing with you on the LT bet, but the consumer in me wonders if UGG has run its course.As an investor, I love the zero debt and net income margin... but still can't help but wonder what happens if UGG's popularity weakens.
I actually worried about that too; however, after talking with many people/customers it seems to me that this brand is still very popular. You do have to understand that the lower demand last year was due to the warm weather - it had nothing to do with the brands popularity. Since the company gets most of its revenue during the 3rd and 4th quarters you can see why it experienced problems. Actually, in order to combat this seasonal problem – the company is diversifying its UGG product line to make it suitable for wear in a variety of climates and occasions. The company is also increasing its international presence and is opening additional retail stores (an additional 25 in 2012 alone, which would bring the total to 70 stores by the end of the year. The goal is 200 stores by 2015). The company is also diversifying its brand offering by acquiring new brands (for example, Sanuk brand in 2011). Overall, this is a very good company (with lots of growth potential) trading at a huge discount to its fair value.
The UGG brand definitely has a competitive advantage today. However, with the brand's popularity arguably having more downside potential than upside potential, plus the rise of many generic ugg style boots, it's very questionable whether UGG's competitive advantage is DURABLE. Buffett-Munger always stress the DURABLE (long lasting and adaptable) competitive advantage. After all, the brand has only been really popular for, what, 5 years or so? The diversification could be a great thing, but it's highly speculative to believe these new brands will come close to UGG's success. If that's the case, diversification might end up just being di-worse-ification. On the bright side the valuation is tempting and the fundamentals are good. Personally, it just seems a little speculative for a gentleman named BuffettJunior. That being said, your CAPS score is much higher than mine and you've probably been doing this for much longer than I have. But only time will tell. Feel free to slam my picks as well lol. I love exchanging ideas and learning from others. Happy investing!
I also feel strongly about this pick. I believe in the management and business fundamentals appear strong. I'm encouraged to see their emphasis on growth and opening new stores as well as the performance of domestic sales and their online sales growth. I see great potential as they compete internationally especially as they put greater emphasis on expanding their Asian presence. Further, I believe the temporary increase in their input costs corresponding to low demand due to weather should create an inherent bounce as the input cost normalizes and La Niña no longer causes warmer Winter weather. That said, this company pushes my resistance to emotional reaction to the limits. I want to thank you for your posts as they give me some confidence that I'm not crazy in my perspective.
Just today I bought more call option contracts. I will continue adding to my position (and leveraging) this investment. The reward/risk is in my favor and it would be stupid not to bet big.If we have a normal winter this year (high probability), and sheepskin costs go down (medium probability), then this stock will perform very well over the next 6 months. Furthermore, the company is expanding internationally and is opening additional retail stores here in the U.S. The company is also diversifying its product line and acquiring new brands. All of these things will cause a dramatic increase in earnings over the next few quarters (resulting in a higher stock price).I’ve heard some people say that UGG's are some kind of fad, but I have to disagree. From talking with various customers (who have bought this product in the past), I am confident that this product is still very popular and in high demand. The holiday season is coming up and people will do a lot of shopping. DECK earns the majority of its revenue in the last two quarters. There is a very high probability that they will crush those pessimistic analyst estimates and the stock price will skyrocket. This is a no-brainer investment for me.
Sterne Agee analyst Sam Poser is exaggerating about DECK's problems. He has said the same thing about the company three days in a row (and each time the stock dropped significantly). Even based on the most pessimistic growth projection this stock is extremely undervalued. It’s tough to watch your investment go down this much in such a short period of time, but nobody ever said being a contrarian investor was easy. I’m very confident that DECK will reward long-term investors.
Sam Poser, the stock analyst at Sterne Agee, has been making misleading claims about Deckers Outdoor Corporation (DECK). According to Mr. Poser, DECK has been discounting the price of its UGG boots by up to 50% (which he greatly exaggerated). After looking online, I could not find a single UGG product that was selling at 50% off, as Mr. Poser claims. And the ones that were selling at a small discount were either the old UGGs from the previous season, or were cheap imitations/knock-offs. Mr. Poser also states that – “it’s clear to us that the UGG fashion trend has faded.” Then he goes on to say that – “the question remains as to how much of the UGG business is weather-related and how much is fashion-related.” Okay Mr. Poser, if it’s clear to you that the UGG fashion trend has faded, then why do you seem so uncertain? You seem to be contradicting yourself. I have also called a number of retailers (who sell UGG products), according to them sales are higher than they’ve been in the past 5 years. And the price cuts, (which Mr. Poser has been talking about all week), are not as drastic as he claims. For example, what investors haven’t been told is that DECK had initially increased all of their prices on the “Classic UGGs” earlier this year. The company just started reducing the prices this past weekend. The “Classic Tall,” which for years was selling for around $180, went to $210 for about 2 months and was reduced to $195 this Monday (9/17/12). Mr. Poser is making it sound as if they are dropping the prices to spur demand, when in fact most of the UGG products are selling above their historic price range.Even using the most pessimistic growth estimates, DECK is extremely cheap based on today’s closing price of $39.03 per share. The company has a healthy balance sheet, good return on capital (ROIC), and is still growing at a high rate. The expansion into foreign markets and the diversifying of its product line will allow the company to be very successful over the long run. Investors need to stop listening to analysts (such as Mr. Poser), who make ludicrous claims without any evidence to back them up.
At my university at least 1 in 4 girls are wearing UGGs. The analysts who said that the brand is just a fad and is no longer popular need to get out of their office and just take a look around. At today’s price of just $36 per share it is a great entry point for long-term investors.
Guess that entry just got a lot better. Flat and declining sales in earnings report.Hopefully you didn't bet to big over the last three months b/c this has gotten crushed.
I hope that it keeps getting cheaper and cheaper. Its not fair to only point fingers at DECK when almost every company has reported lower earnings these past two weeks.
BuffetJunior, I respect your opinion a lot, but I think you're probably wrong here. DECK is a huge value trap; UGG has really run its course. At the brand's peak, 3/4 girls (at Western University - Canada) had UGGs or UGG knockoffs. Now fashionable girls are looking desperately for other options and all the others will follow.
I will be honest; I overestimated what the company can do in my original analysis. However, now people think that the company is not buy at any price. Personally, I hope the stock price continues falling because this will be a good contrarian investment. Also, DECK is not the only one suffering right now, almost every company has reported bad earnings this quarter. There are a lot of bargains right now (including DECK) and patients investors will be rewarded by investing in them.
I'm going to go do a bit of DD on this, but first thought I would share this, my favorite free tool for consumer trend tracking:http://www.google.com/trends/explore#q=UGG&cmpt=qIn this case however, the trend shows nothing that you haven't already mentioned; extreme seasonality and a lower peak in 2011, ostensibly from the warm winter. Hooray data mining!
Here is my Seeking Alpha article on DECK:http://seekingalpha.com/article/1036711-deckers-outdoor-corporation-could-fetch-as-much-as-92-per-share
According to SEC filings, Carl Icahn has amassed an 11.3 percent stake in the boot maker Deckers Outdoor Corporation (DECK). Icahn hinted that he may initiate communication with DECK’s management team but he did not provide details of his intent. Industry analysts believe Icahn may try to force a sale of the company to a large company like VF Corporation (VFC), which acquired Timberland last year for $2 billion.
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