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Deckers Outdoor Corp. Message Board

  • indian8788 indian8788 Feb 7, 2013 9:22 PM Flag

    Why the buyback was brilliant

    Okay, yes, right now anybody can see that the buyback was good. But I was pretty much the only one besides one or two others who fully endorsed it and raised management for doubling down(literally buying 200M worth of shares below $50, more than $120M under $40).

    But if one takes a look at Apple and David Einhorn news today, it shows why Angel Martinez and Zohar Ziv have our backs and made the right choice. Einhorn's beef is that Apple is sitting on cash that is basically getting no return(due to lack of investing and low interest rates) and that the cash one would think would be better served if given back to the shareholders. I agree fully with him.

    Our management, for Deckers, first off made the decision to buyback before the dividend tax hike. so that in hindsight proved brilliant as better to use the cash to buy back shares at 5 year lows than to give a dividend that will be taxed higher due to the tax hike. The dividend can give up in years to come when we aren't sitting at 5 year lows and would be a better investment by just giving investors cash back.

    So kudos to management for having the wisdom to realize the cash was useless in the bank and borrowing costs were low(low interest to borrow) and the stock was low, so the best thing was buy-back $300M worth of shares.

    Kudos Angel and Zohar, kudos.

    Z

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    • Excellent post Indian, one of your best! I was one of the 2 that endorsed the buyback. I totally agree with your Apple analogy. I'm very glad management saw that their own business was undervalued. Who would know better than management themselves. Seth Klarman talks about the importance of owning stock in companies that eating their own cooking as Martinez did when he personally bought in the open market. The buyback was another clear sign that they knew where to put the money to work. Better move than a dividend since this is a growth company. Many smart companies are buying back these days.

      Sentiment: Strong Buy

      • 1 Reply to jaquecroissant
      • Jaques, really appreciate the compliment.Glad you liked it and agree with it.I just found it interesting that a guy like Einhorn comes out and says "I'm suing Apple because they are not taking my suggestion to use cash" and I actually agree with him. That cash has been sitting around for at least a year now and has accomplished nothing for Apple.

        This board is jubilant now(typical being that we are up more than 50% off the bottom set 3 months ago) but all these other regular posters were angry that management had the nerve to put our cash that was just sitting there as well as use our generous credit facility(due to UGGS being a cash cow these last 8 years) to borrow money at record low interest rates so we can buy as much as we can at 5 year lows.

        Some of these other posters just couldn't understand this. But now, look at Einhorn come out and bsically shout at Apple for the world to hear "use the cash!".

        Either way, I felt enough people would appreciate the comparison/relevance.

        Z

 
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