Deckers Flunks on Schwab Scan, Despite Its 'A' Performance (DECK)

My broker Charles Schwab gives great customer service and I can't say enough good things about the firm. But when I scanned my holdings in Schwab Equity Ratings last night, I noticed most weren't covered, and other got a smattering of C's and D's.

Suddenly I saw one of my stocks had an "F" rating -- Deckers Outdoor (DECK). Schwab says its rating is based on data as of February 24, 2006. It breaks down its evaluation of Deckers on the basis of Fundamentals, Valuation, Momentum and Risk, giving the company a "D" on all four. (Why that equates to an overall rating of "F" instead of a "D" escapes me.)

I first recommended Deckers on October 18 at $20.92 a share. It closed yesterday at $33.90. That's a gain of 62%.

The stock is up a bit since Meryl Witmer recommended it in this year's Barron's Roundtable, yet I'd imagine the fundamentals and valuation are intact (though it was cheaper last Fall). Momentum is surely on the side of the stock price. And ditto the company since Uggs can't be seen as a "fad" anymore.

Risk? Well, you can make a case the stock is risky. It has had a wild ride over the past year. And regular readers know I had a wild ride with it myself. Plus, the share float is small, which some would say is risky in and of itself.

Still, I can't imagine Schwab giving the company an "F" rating. I'm actually surprised Schwab even covers Deckers at all considering its small market cap. (It doesn't rank Fairfax Financial, which is a much bigger company than Deckers and is listed on the NYSE.) In short, if this company deserves an "F," I hope a lot more of my stocks "flunk" in the coming months.

DECK 1-yr chart:

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