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Under Armour, Inc. Message Board

  • overlord_18_007 overlord_18_007 Nov 5, 2007 12:12 PM Flag

    Why I Don't Care - Part 2 of 3

    Last Tuesday or earnings day this stock traded over 17 million shares. This was by far the heaviest volume day ever and represented a capital transfer of $1B through UA. This is a very bullish sign for the medium to long term. Not only is such a volume spike indicative of serious investor interest for the long term, but it is also a very important technical measure (obviously the fundamental interest and technical indication are related). Go pull a five year stock chart on any successful growth company over the last decade and you will see the same type of volume spike before a marvelous one to three year run. I believe that we will see another similar confirming volume spike over the short term as soon as some of the CROX related �apparel fear� subsides.

    And so what about CROX�s fall and the apparent take down of the rest of the apparel industry? Clearly UA was down the past couple of days in sympathy with CROX. Yet, I do not believe that this will be the case for much longer, regardless of what CROX�s stock price does.

    For perspective sake remember where CROX and UA both were only six to nine short months ago. Adjusting for CROX�s 2-for1 split in June and even after the past week�s massive correction, CROX is trading at just under $100. Now using this adjusted basis, remember back in the March and April 2007 timeframe both CROX and UA traded in the low $50s together. CROX took off, and despite losing 1/3rd of its value last week has still doubled from that point while UA (after its much more gradual correction over the past two months) is only marginally up. Why?

    The reason for the divergence, in my view, in the relative competitive marketplace that each company had/has before it. CROX found/finds before it a landscape practically devoid of a pure play competitor for its lone product � casual shoes. And while this open playing field served as a huge positive for CROX over the past year, it can (and maybe has) also lead one to believe that it could be �just a fad�. The very landscape (undeveloped and somewhat undefined until CROX arrived) is the very thing that now concerns investors about CROX being �just a fad�.

    Unlike CROX, however, UA has a much more defined landscape with very real competitors. This, in my view, has been part of the reason for UA lagging CROX over the past year. There were and are much larger barriers to entry into the broader apparel marketplace. UA found itself competing with some of the best name brands on the globe. But the irony is that what has made UA�s situation much more challenging over the past year (relative to CROX) is also now what cannot allow it to be labeled as �just a fad�. It is a real company within a real industry competing with real companies for very real dollars. The cost of admission into the fraternity is higher in this instance, but once you are in you and in.

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