I'm just being frank with other investors on this board. This stock could be glued to the 60's for awhile. I'll be sticking around. But its just a perfect game plan by big money. They have the margins to withstand a move like this as some of these guys were getting 30-1 for their money in 2008. So if they cut that down to 15-1 or even 10-1, these guys are sitting fine. It's guys like us who have to put up to play that get the shaft, I've got my books, my movies/tv shows, now I need to go find some dates to bide my time. Good luck to the rest. But after thinking about this thoughtfully all day, regarding the price action, I can see them gluing this for awhile.
To just elaborate on my thinking. Nothing in my opinion of DECKERS being undervalued by 100%+ has changed. Nor do I believe this brand is going anywhere but all over the world.
But this is the game of Wall Street that I have been observing for awhile now in-depth. I've been holding Under Armour long term now for more than 17 months. Stock is one of the top 200 performers on the year; but its been one crazy ride. At least 3-4 new all-time high's followed by 20-30% pullbacks only to roar back and set new high's several months later. This is excluding the run-ups before new all-time high;s that had their fair share of pullbacks of 15-25%. worst pullback in the last year for Under Armour was from 82/share to 51 in a matter of two and a half weeks from top to bottom. It was about 6 months before Under Armour set a new-all time after that.
But the point is it did. But the point of my post is that wall street and the other guys playing the game trying to beat us wildly outadvantage us when it comes to the game. But I've picked up a trick they can;t beat; patience. I can manage my money prperly and I can be patient. They can;t steal my shares that way. I guarantee you they stole 80% of shares from retail investors on this dip down as if someone was holding anywhere from 300-infinity hares, there loss is relatively tragic. I feel for them. But this is just a reset to reload for the next 3-5 years when Deckers net income is going to grow by nearly 74%. But this might take awhile before it heats up again. I hope I'm wrong, but just laying out my thoughts. Not negative. Being realistic and being patient. Expect the worst, hope for the best.
I agree Indian. These things take time. A whole new set of investors comes into to play during this process. A lot of recent investors give up thinking they have better ops elsewhere. Truth is there aren't a lot of companies sporting such fantastic garp characteristics out there. It's worth waiting this out. You also have the added advantage of paying lower cap gains tax when and if you do eventually sell. If you were to buy LULU right now for example, the odds of having it beat the market are pretty low since it is fully valued now. There have been many studies over the years showing that a ttm p/e of 30 is about the max you can pay if you hold the security for 5 years or more. If you pay ttm p/e of 50 or more and hold for 5 years you are virtually guaranteed to have an investment that doesn't beat the market. Lesson: Don't overpay for growth! DECK is currently in the fantastic position of being something you can comfortably buy and hold for the next 5 yrs given it's ttm p/e of 12.4!
Indian, Thanks for all the homework! Nice work indeed. I agree completely. The Coach analogy is perfect. DECK is in the process of becoming the next Coach. The Asian expansion, the emphasis on high end, the collection series. I could go on.
Yes, I could see over 4 billion in market cap. Currently I get a fair value calculation of around 150, pretty close to what you have come up with.
Thanks Jauques. I remember Apple sitting on crazy low P/E's for the last few years despite its insane popualrity and ability to create cash year in and year out and increase revenues. DECK and APPLE are two peas in a pod imo. Best of breed products, both generate cash, both sitting at low p/e's. Deck is just resetting for the next round. Todays price action was fantastic. I felt we made a bottom in the last week or so, so not so surprised. Though I could see us retesting the low sixties, high fifties before heading higher. Just the way I've seen other stocks do it. Lots of dancing. But we know the value so they aren;;t faking us out.
I'm long DECK, but I'm a little concerned about their cash position. I hear people talking about how much cash they generate, but when i look at the cash flow statement I really dont see that. This past year they had negative free cash flow. I'm not sure what people are talking about when they say DECK generates lots of cash.
A lot of people SAY a lot of things. Like how UGS were suposed to be a fad every year yet the revenues for UGGS keeps hitting new record year in and year out. Action speaks louder than words. Managment feels its safe to use 37% of our cash to buy u shares; well, thats a retty strong statement by management that it sees no reason to HOLD on to the cash due to "turbulence" in the future where cash might be necessary. Read between the lines. This is not the first time this company has bought back shares. They did so in 07'-08' if I recall correctly. The company had 495M in cash at the end of last year. It is down to 265M as a result of an increase in sheepskin costs among others I suppose. Yet the stock was sitting on a half a billion dollarrs in cash. This company generates lots of cash. Don;t know how one could say otherwise. Short term cash flow "problems" effect every fast growing company. It's the nature of trying to plan for one's future growth appropriately, but which is much harder when one is still growing at a fast rate. International sales growth is tremendous. It will all work itself out and management is basically buying up the company with its own cash, creating tremendous value for those holding as less eqquals more value.