Crocs Back on Its Feet?

Crocs (CROX) actually shows signs of life: It was up 7% on Friday. I had to reboot the computer to make sure it was not an error. Talk about sentiment out of whack with reality. As I mentioned earlier, I have been layering in on each major step down in this stock; yes way too early starting at low $50s, but I've felt every price point under $55 is a steal. (keep in mind the last time I was selling Crocs heavily was in the upper $60s). And this is why I buy in smaller scale at the beginning and in larger chunks as it falls farther.

So if they give it to me at mid $40s and then unbelievably mid $30s, I am taking it. I am getting more earnings, and higher future estimates for about half the price. What a country. This is a stock shorts have been waiting to crush for a long time and they finally got their chance after being wrong for well over a year.

That said, this (to me) creates one of those buying opportunities that can turbo charge a person's long term portfolio (or a fund's). With my other purchases on Friday, Crocs is just a whisker under 5% of the fund. There are hundreds of things one can read about Crocs (CROX) so I won't rehash the arguments I posted earlier, but here is a note from Thursday:

• In a client note, Thomas Weisel Partners analyst Jim Duffy said he met with Crox management and concluded that investors' concerns surrounding Crocs were "unfounded" -- despite recent troubles.
• Duffy said demand in the U.S. market remains healthy and will likely boost distribution with new styles. In 2007, Crocs had 60 different models in the marketplace, but Duffy said this number is expected to grow to 150 in 2008.
• Looking abroad, Duffy said opportunities are promising, as well. Crocs expects international markets to be the largest growth driver in 2008. "Throughout 2007, international demand has been far stronger than expectations," Duffy wrote.

Anecdotally, I am in a cold weather state and Crocs is supposed to be a warm weather selling item; but I am seeing people wearing them even in this cool weather. And they now have versions with fleece. And I am not talking about grandmas and 4 year old girls; very attractive women in their 20s are wearing these gosh ugly things. (again just anecdotal evidence and I was only staring at these ladies to do research for my investors, honest)

So until I stop seeing those type of trends first hand, I am going to have a hard time saying the story is dead. And again, the international story is just getting started - yes knockoffs are a problem, but the pie is very large and in many parts of the world no one has even begun really eating. I am also curious if they get any traction with apparel (I am not counting on it, but it would be a nice icing on the cake.)

Also this "Prima" style for women is interesting, these ballet type shoes seem to be a big hit for whatever reason that I don't get, so Crocs has the knockoff - I like. It shows they are not just sticking with those darn hole filled ugly things. With that said, damaged momentum stocks don't just bounce straight back (although they do bounce strong when shorts do cover), so it could take time to see a meaningful comeback, but mid $30s for this stock is approaching outrageous on a valuation basis. These are valuations retail-type stocks which only have domestic sales (no international) and are far more mature get... I will remain patient with Crocs. Analysts actually raised 2008 estimates from $2.50s to 2.70s post earnings. Classic!

Disclosure: Long Crocs in fund and in personal account

Comments

[borisb]

agree with most of this, but the price to gross profit ratio was/ and less now, but still rich.

[borisb]

agree with most of this, but the price to gross profit ratio was/ and less now, but still rich.