V.F. Corp. - Where Is The Love?

| About: V.F. Corporation (VFC)
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Summary

The stock is down this year and has been down for the past three years.

Three different analysts didn't have nice things to say about the company recently.

I believe this is an opportunity to be greedy while others are fearful in the stock.

V.F. Corp (NYSE:VFC) seems like it has been in a perpetual decline since I purchased shares back in late November. As a matter of fact the stock is down 3.5% so far this year in the midst of the retail wreck that has been taking place. Shares never looked better than when I purchased them in November but now this drop in price has me itching to evaluate the company to see what has been happening recently to consider buying more on the decline.

Baseball has been America's pastime as it has been around for over a century and for the longest time Majestic has been the official supplier of uniforms to the MLB. Majestic is one of V.F. Corp's brands but however the partnership with the MLB was just ended in the early part of December. The change won't take place till 2020, but this is another feather in the cap of Under Armour (NYSE:UA) who has been disrupting the athletic wear scene over the past five years. This is definitely a blow to V.F. Corp as nobody wants to lose a steady revenue stream as this deal once was. Now the company is going to have to rely more on the fickle tastes of the consumer to purchase more of their others brands in department stores to make up for the lost revenues of the MLB deal.

On the bright side, this winter has been rather cold which may entice the aforementioned fickle consumer to make winter coat/jacket purchases and V.F. Corp has a large brand which serves that particular need. Northface is a popular brand among outdoorsmen and the perfect winter jacket to wear in these cold times. I would look to hear about it on the conference calls that the consumer was purchasing more Northface products this winter. But I would also maintain some cautiousness because the cold winter can be used as an excuse by management to say that the consumer just wasn't out shopping because it was too cold to go outdoors.

As I mentioned earlier, the retail stocks have been hammered since the early part of the year and going back till December. The apparel industry names such as V.F. Corp fall under the retail sector and the majority of the names in the industry have also been hammered. As such, Jefferies recently put out a cautious statement regarding the apparel industry and even cut V.F. Corp down to a hold rating. The rating downgrade bothers me a little because so far the stock has been down for the past three years. I felt that being down 10.9% over the past three years while the S&P 500 is up 26.7% made VF Corp a perfect candidate as a catchup trade in an economy which is predicted to be booming. Afterall, the consumer is poised to purchase higher quality clothing with the excess cash they have in their pockets after projected double digit GDP growth rates, right?

But soon after Jefferies cut their rating on the company Canaccord Genuity also came out and cut their rating on the stock to a hold. Canaccord states that VF Corp can be squeezed drastically on margins if the trade and tax policies that Trump has in mind actually come to fruition. Mr. Trump has been talking a big game so far but with no actual plans. I have yet to hear anything articulated about his economic plans other than they are going to be "uuuuge". I believe he will focus primarily on the Affordable Care Act first, then the repatriation of cash held overseas, then he'll tackle this issue about tax policies. But it doesn't mean that it isn't a risk to VF Corp, it most certainly is.

Last week the Outdoor Retail Market trade show took place and D.A. Davidson took the opportunity to repeat their neutral rating on the company with a $60 price target. A $60 price target is a 20% appreciation of the stock price from today's levels. The firm says the company will face headwinds which may suppress the near-term earnings growth expectations.

I actually initiated my position in V.F. Corp in late November and have been pretty upset about the purchase thus far. I will purchase shares until V.F. Corp gets above $55, because I believe that is where it offers additional value. I've selected $55 because it is my cost basis. However, I do believe that the stock continues to offer value below $58 and I've selected $58 because it is the midpoint of the 52-week range.

I swapped out of T.Rowe Price (NASDAQ:TROW) in favor of V.F. Corp during the 2016 fourth-quarter portfolio change-out because I ended up turning a profit in the name (7.8%, or 35.4% annualized) and wanted to lock in those profits. So far it looks like it was a horrible swap since both the market and T.Rowe have been beating V.F. Corp. For now, here is a chart to compare how V.F. Corp and T.Rowe have fared against each other and the S&P 500 since I swapped the names.

At the end of the day, it only matters what a stock has done for one's portfolio. For me, V.F. Corp is one of my mid-sized positions and hasn't done horribly, as I'm down 7.2% on the name, while it occupies roughly 7.2% of my portfolio. I continue to believe in the name because it continues to generate a healthy dividend. I own the stock for the dividend growth portion of my portfolio, and I will continue to hold onto the stock for now. My portfolio is up 12.3% since the inception while the S&P 500 is up 9%. Below is a quick glance of my portfolio and how each position therein is performing. Thanks for reading, and I look forward to your comments.

Company

Ticker

% Change incl. DIV

% of Portfolio

Electronic Arts Inc.

(NASDAQ:EA)

7.92%

3.73%

Facebook, Inc.

(NASDAQ:FB)

5.29%

9.33%

Eaton Vance Corp

(NYSE:EV)

5.27%

4.89%

The Home Depot, Inc.

(NYSE:HD)

4.38%

4.85%

AbbVie Inc.

(NYSE:ABBV)

2.89%

3.91%

Starbucks Corporation

(NASDAQ:SBUX)

1.15%

5.06%

General Electric Company

(NYSE:GE)

-0.30%

4.63%

Skyworks Solutions Inc.

(NASDAQ:SWKS)

-0.92%

9.25%

Diageo plc

(NYSE:DEO)

-1.71%

9.70%

V.F. Corporation

-7.19%

7.23%

Silver Wheaton Corp.

(SLW)

-9.05%

7.12%

Gilead Sciences Inc.

(NASDAQ:GILD)

-12.00%

20.92%

Cash

$

9.39%

Disclaimer: This article is in no way a recommendation to buy or sell any stock mentioned. This article is meant to serve as a journal for myself as to the rationale of why I bought/sold this stock when I look back on it in the future. These are only my personal opinions and you should do your own homework. Only you are responsible for what you trade and happy investing!

Disclosure: I am/we are long VFC.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.