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Michael Cain
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Investor. Equity Research is my passion. My major theme as an investor is focus investing. I'd like to engage and collaborate with other major investors who share the same passion for the markets as I do.
  • The New Opportunity 0 comments
    May 8, 2012 8:48 AM | about stocks: ICON, BRK.A

    Two words- Iconix Group

    Ever heard of RocaWear, Peanuts, Candies, or Joe Boxer? Iconix Group owns these brand names (including many others) and licenses them out and collects the royalty (most of it guaranteed). That means no inventory, no overhead, and no stores to maintain. Their cash is used to buy more and more brand names so that manufacturers can use those words to put on clothes, comic strips, etc.

    They are trading at a very low price due to slow growth in their men's wear. Not a problem since this is happening all over the place- something that will balance out over time since all men need clothes to wear. They are expanding rapidly overseas and just announced their joint venture in India- a huge market for American brands.

    Let's see what we can get five years from now if we invest in the stock today-

    - EPS Growth Rate (if they grow at a dismal pace)- 10%

    - Time Frame- 5 years

    - P/E multiple in 5 years (take a very average multiple just in case)- 12

    - Price in 5 years- $32.88

    - Price today- $15

    - Compounded annual return- 17%

    Hmm I think Ally bank has the best returns for a three year CD right now for just over 1%- which would you choose? Using Buffett math and planning for a very dismal future for Iconix Group (they have grown over 30% for the past five years), the poorly performing company will actually give you close to Buffett numbers for a return. The key is to get in when the price is right, have faith that the management is competent (they have been growing portfolio and profits steadily for ten years), and have patience when the market ignores its prospects.

    "Eventually the underlying value of the company will always reflect in its stock price." - W.B.

    Stocks: ICON, BRK.A
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