it is why I dislike Cramer and Fast money and all these other stupid shows on CNBC. They pretend they know which direction technicals and market whims are going to go or react.
But the guy who has shown to arguably be the best INVESTOR, warren buffet, has explained that all it takes is discount present value to future cash and interest rates as a comparison.
So if the ten year is at 3%. You have a company trading at 1.97B, but in 36 months from now, one can reasonably bet the company will be earning about 10% or more than the ten year, that is a good investment.
But if one has a company worth 7.5B, earning 100M in cash, with low growth, the 3% becomes MUCH MORE attractive and the stock should underperform.
Not definitely but should. Depends on the business and its barrier to entry, its durability, etc.
But you never hear guys on these shows talk about any of this stuff because while we are all gamblers, they are basing their "trades"(what are they trading 50-100 shares?) on nothing but their own air.
I look for companies that hit a wall in the market, get sold off severely, despite still being very relevant and going to continue to grow.
I did it with under armour 3 years aho, when the stock was fat 36/share pre-split. It got sold off in the economic crisis of '08. But when you walked into a sporting goods store, it was taking up 50% of the space as opposed to just a quarter before the crisis began.
So it wasn't hard to realize that UA had a lot of growing to do and the stock was trading at a cheap valuation relative to peers(nike/adidas), so it was just a matter of time for people to realize what I have realized. I left that stock at 5B valuation, but the stock is doing very well because the company is still growing. I think it is fully valued for now but the market prices in the future how it wants to.
With Deckers, one is getting a similar example. The boots are still very popular despite being called a FAD for more than 6 years now. Sheepskin costs have hit the bottom line, but have resided for 2013. Management has been proactive NOW and used our cash to buyback stock at 5 year lows(very cheap) and hs come out with a product that 3 years from now should double our cash flow from current 89.5-100M/year excluding growth. Just based on current revenues.
The buyback means there is more cash per share coming to us due to managements AGGRESSIVE and smart buyback at 5 year lows. For now, it is ALL subjective as DECK has to show me I'm right in my predictions over the next 12 quarters.
Much like it took UA to do what it has done, trading near all-time high's when it was at all-time lows JUST 5 years ago.
Market looks for growth. Deckers offers both growth in revenues and cash(without really needing growth in revenues). But 130 more stores 3 years from now than current 70/89, means one should expect more growth.