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The Company's principal business activity is the design, development, marketing and distribution of technologically advanced, branded performance products for men, women and youth.
This is my "highest conviction" pick.I was big into UA a few years after they first came out, but kind of forgot about them for a while. Their shirts last forever - my original ones still look great - and they didn't have too many product categories at the time. But, on a trip to Kennywood (local amusement park) last year, every other person I saw was wearing UA gear. I had a Peter Lynch moment, and checked to see if they were public. To my surprise, the stock was even pretty cheap at ~30 P/E, and a PEG around 1. I tried to gauge the sentiment, and everyone seemed to be saying that footwear was going to kill them.I figured they could just do ok with footwear, and still be a great growth story. I read that footwear supposedly helps them gets deals with sports team they could not otherwise get, as the teams want a full package. And I read reviews of their then up-and-coming new basketball line, which were all positive. Also, I was impressed that the company was taking the time to rethink their footwear strategy and get it right.Currently, I think the stock is a bit overheated, even with the recent pullback, but I'm not selling. Here's what I like:- Everything they make or license is an improvement over what's currently available. Or at least it's marketed that way, but I tend to believe it. I bought a Charged Cotton t-shirt earlier this year, and am very impressed. It has a very nice look and feel to it, and dries quickly as advertised.- Their stuff is very high quality. The sort-of downside to this as an investor is it lasts for a long time, so people might not buy as much of it. But I think the "halo effect" works here, at least with me. I'm buying a lot of their other product categories b/c I know it will be made well. - There is lots of opportunity to move Charged Cotton into more categories, like polo shirts. I'm also eagerly anticipating their Storm Cotton waterproof line. They're always expanding.- UA has a strong brand name. AFAIK, not many (if any) of their technologies are patented, but they still manage to dominate their categories. And strong brands are usually better at passing through higher prices, which is coming into play now.- Kevin Plank is extremely ambitious. Today's news show that pretty clearly, concerning his goal to double growth over the next three years. But it's always been clear - he said in the past that he will never sell the company, and will go down fighting if necessary. One of his stated goals is to be like Polo Ralph Lauren, a company that sells clothes, but also has squeezed their way into selling paints without hurting the brand name.- They just hired Omnicom to take over some aspects of marketing from their in-house team. I'm not too fond of their current ads, and Omnicom is a serious ad agency that makes some of the best ads I've seen (i.e. Apple)- I like this company long-term over Lululemon because of their tie-in to pro sports. Lululemon has captured the yoga crowd, and it's a great crowd to have ($$), but UA's got pro, college, high-school, middle-school, and wanna-be athletes in lots of different sports. What happens if Yoga is more of a fad? And how much of their product can people really afford to buy. UA's expensive, but they're not selling $100 exercise pants... I do also like the LULU story for now, though.What I don't like:- Inventory issues. They need to fix this soon. Hopefully their statements about meeting potential demand for new products are accurate.- Free cash flow. Where is it?
Having the BCS football and NCAA baseball championships in their belt are huge feathers in the cap. Also a huge one is they are growing internationally -- having the Spurs for 2012-13 as a kit deal should be interesting but adventurous for their goals in the Premiership.
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