GuruFollowing

GuruFollowing
Contributor since: 2012
I agree with your opinion that if the stock goes to $20, then the market presupposes the company's business model has major problems. I appreciate your comments, which are detailed and thoughtful. Thank you.
I don't predict where the stock goes. I analyze the facts to decide if I want to buy the stock for more than a year or not.
I disagree, if there is no fundamental changes to the underlying economics of the for-profit colleges, your thesis is correct. The for-profit colleges, especially Apollo, will recover and the valuation will improve significantly. As someone wise once said, "when the facts change, my opinion changes." You may want to reconsider all the facts, old and new, before you decide to maintain your stock position or to make a change. Good luck!
Sorry for the late response, I had difficulty accessing the seekingalpha.com. My opinion regarding the for-profit colleges does not change regardless who wins the election.
My thinking toward Apollo was like yours, until the Bridgepoint Education case demonstrated a more fundamental issue with the for-profit colleges. Now I believe the tight regulatory scrutiny and the reexamination of the colleges by the accreditation agencies change the rules of the game. For-profit colleges will recover, but not to their former glory and the time horizon is unknown.
Typically the board makes a decision about the buyout offer first. The shareholders of American Greetings will vote on the recommendation of the board whether to reject or to accept the offer. The lawsuits serve as stimuli to encourage the board to act in the interests of minority shareholders. The typical time could be 1-3 months, normally not longer.
I did not the Ugg boots are a fad. They are aound for a long time and likely will be around for another 5-10 years or more, but the recent sales data suggested the sales peak for this cycle (10-year cycle) is probably over.
You are saying there is no problem with the Ugg boots, then what is the problem? Is it just a small market issue that caused the company's sales to decline or is there a larger issue?
To fix a problem, one must first admit what is the real problem. Weather has had a negative effect on Ugg boots' sales; I don't believe it is the primary reason. You said "a management that" had "10 years of spectacular growth" based on Ugg boots, then everything good always come to a stop.
I understand DECK's management is diversifying their sales, they are on the right direction. The management needs to deal with Ugg brand problem before they can concentrate their money and time on Teva and Sanuk. So far the management was saying the sales decline of Ugg boots is only a temporary issue. This is the real problem I have with the management.
A good strategy. I would do the same wait and see. I won't make a move until I see improvment is coming.
Women buy new boots (i.e. Ugg boots) because they like to, not need to. When the CEO stated women buy these boots after the original purchase as "replacement purchase" did not match common sense.
If you are a patient investor and can withstand the short term price decline, then Deckers Outdoor is certainly a good stock to buy.
I agree. Every person will make mistakes in his/her lifetime. It is a difficult thing to admit that speculator sales growth is coming to a stop.
I think the stock has potential to rally after it declined to $29.48, but you are going to see a lot of volatility on this stock.
Deckers Outdoor is a good company, but I agree the management needs to make some changes.
Basically, you don't believe their Ugg boots are losing glamour. You expect their sales to rebound in 2013, if not by the 4th quarter.
Thank you for the feedback.
1. "Most of the UGGs that were recently discounted saw price INCREASES just a month or two prior." If so, how did you find out the information?
2. I presented the worst case scenario, if the sales go down 10%, it will negatively impact the share price to illustrate now is not a good entry point. In your prior article, you stated the following information, "Poser stated that industry data showed UGG sales in July and August fell sharply from year ago numbers." And now you are saying, "the most bearish analyst out there has DECK's sales rising from $1.38 to $1.46 billion." ?? The 10% sales growth is the target that DECK's management gave in their 2nd quarter, 2012 reporting.
3. DECK is selling wonderful products that are durable. Maybe that is a part of the problem, the Ugg boots are so durable, there is no need to replace old boots with new ones. How many additional ones does a consumer want when he/she already has a few pairs?
4. Thank you for the detailed comments.
Thank you. I found the information useful.
I am not estimating DECK's growth 3 - 5 years into the future. The article is the result of my analysis on DECK as it reached a 52-week low of $34.59 on 26 September 2012. I was excited when I studied DECK at first; I thought like Tim Travis's article "Deckers - Quality Brands And Growth At A Discounted Valuation". However, my opinion changed as I dig deeper into DECK's financials and the annual reports. DECK is a good company selling wonderful products. I have no doubts about DECK's future prospects.
However, I am an investor with a certain time horizon. I want to be certain by the first year holding period, there is significant progress made. The management is less forthcoming than I like, they knew Ugg boots sales will slow, so they projected a 11% growth rate for 2012. The management also knew they probably face a more difficult sales situation when they reported the 2nd quarter 2012's results, they maintained a sales growth of 10%. Then all of a sudden, we see sales of Ugg boots discounted. Consumers' habit is hard to break once you teach them that a well-established brand can be on sale, they will expect the same treatment next time. It does not help to build brand loyalty.
I don't believe DECK will grow like the past, so the coming 3rd quarter earning report is very important to confirm or disconfirm the sales trend. I have no dobuts that DECK will continue to grow in the future, but that growth has to show up now for me to stick around.
Let me be more clear. I am saying DECK's growth in 2012 is not going to be in the 30% range. DECK's sales growth is moderating, that is a fact. I did not explicitly say its sales are going to be lower than 2011's. These are two different points. If you look at DECK's management 2012 projection (http://seekingalpha.co...), approximately 11% for Ugg brand boots. The management knew sales will not be as high as last year.
Additionally, the Ugg brand's discounting in retail channels indicated the sales problem is perhaps worse than what the management said. The current stock price reflected this point. DECK's sales problem is not a hiccup, it indicates the reversal of the trend, so I said, "DECK is a decling story" vs. what it used to grow (38% for 2011 and 23% for 2010). How worse? I don't know. Doing the worst case scenario, I said if the sales is lower than 2011's figure, the current price of $35.86 is not a price cheap enough.
There are two points here. First, there was Sam Poser's report on DECK's projected sales for 2012. An trustworthy analyst will not conclude there are signs of slow sales without factual evidences to back up the claim. Secondly, I personally checked the websites that sells Ugg boots, these boots are on sales. A well-establised brand like Ugg will not be on sale unless the company's management feels the need to do so. DECK's sales growth is moderating, but I am not saying it is definitely going to be lower than 2011's. I am saying if the 3rd quarter's sales or the 4th quarter's projection turns out to be worse than expected, the current stock price of DECK is not cheap.
This simple math is to illustrate that DECK has a big job to do to keep up with sales. Obviously, Ugg boots are not priced at $300 a pair. Where did you get the 22 million pairs sold last year? I reviewed their 10K, but did not find the figure.
Since Ugg boots is 87% of DECK's total sales, Teva has a minor role in the outcome of the company's sales. I did not take the time to calculate Teva's value. Sanuk was newly added in July of 2011, it takes more than one year to see what DECK can do with Sanuk.
We are talking about what the stock market will react if the 3rd quarter sales turn out to be disappointing, not what the company would be worth in a private transaction including all 3 brands.
In DECK's annual report, it said,
"Our business is seasonal, with the highest percentage of
UGG brand net sales occurring in the third and fourth calendar
quarters and the highest percentage of Teva and Sanuk brand
net sales occurring in the first and second calendar quarters of
each year."
What growth DECK had at the second quarter is not indicative of the sales trend of 2012?