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Deckers Outdoor Corp. Message Board

  • indian8788 indian8788 Jan 22, 2013 9:46 AM Flag

    Margin of Safety

    Most investors don't investusing this logic. It is the logic that entails assessing risk. This is how hedge funds way whether to invest in ompanies or not. Not t question how much is this undervalued but how much can I lose.

    See, the main job of Hedge funds is to hedge risk. Losing money is pure failure, no matter how short term.

    So with a company like DECK, trading at 1.3B, what would a hedge fund have to lose at this point?

    At 4B, yes, there was a lot to lose(despite great earnings of 199M) as UGG boots could prove to be a decade long fad. So the stock sells off 75%,. But now at 1.3B, with 150M in earnings(hamperedby short term increase in sheepsin costs and warmer winter) and the company innovating to create more top line growth as to be less reliant on the UGG brand and a therefore much heathier company, there is a tremendous margin of safety.

    Even if one invests and the stock goes down 50% from this poin, the stock will still get bought out at this level or not much lower. The upside is it goes back to its all-time high nd creates new high's.

    Very littl risk at this poit. It can go down, but one will get back the $47/share in the end. Margin of safety.


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