Sunday, September 26, 2010

"Let's take a look down at our feet and see if we can come up with any investment ideas"

Dorothy's Ruby Slippers
Dow Jones 10,860  (UP Strong)   Week ending 09/23/2010

 Why Shoes?  My daughter Molly told me I should buy stock in Chuck Taylor's Converse High top sneak company because they have been around for ever and are very popular.  Sometime in 1908, Marquis Mills Converse decided to start a rubber shoe company, bypassing a rubber trust that prevented most companies from doing business directly with their retailers. Early catalogs bragged about how many trucks left the Converse factory in Malden, Massachusetts, delivering product directly to stores in Boston. Mr. Converse’s idea worked. But more importantly, it survived. Chuck Taylor then joined the company in 1918. Unfortunately , as far as I can see, the company is privately held and not traded as a  common stock.

Converse High Top Sneaks 

 So what shoe companies should you buy stock in? My wife Deb tells me that Skechers USA Inc. (symbol SKX, $22.12)  sells sneaks that when you walk in them they are designed to make you lose weight? Novel idea. Skechers has a very reasonable PE (price earnings ratio) of 6 , with earnings for 2010 of $3.79 a share and for 2011 of $3.89 a share. That is not a big year over year increase, but still very good numbers for a stock trading at $22. Quarterly sales numbers rolling forward look very good, so I would call this one a very reasonable BUY

My hero Jim Cramer scooped me on Friday with
Nike Inc. (Symbol NKE, $79.57) because they had come in and reported good quarterly earnings on Friday. This blue chip stock is the 800 pound gorilla in this shoe space. It has a 3 year Total Return of 40.8%.  With long term earnings growth running 12% and the company trading at a PE of 18, there is no reason to rush into the stock here.  For a conservative investor that wants to grab this and stash it away in an IRA account for total return over 5-10 years, with it's dividend it is a very high quality Large Cap investment and would make a solid building block in your portfolio.  

If you are looking to add something with a little more juice for the short term, Deckers Outdoor Corp. (Symbol DECK, $47.61) is the shoe stock you are looking for. Long term earnings growth of 24.33% and earnings per share in 2010 of $3.53 per share and in 2011 projected at $3.94 per share make DECK an excellent stock for you to own in your portfolio. 5 year sales growth of 30.29% and with a one year total return of 68% , Deckers is the best pick in this shoe area of stocks with many years of growth ahead.

P.S. ****   I did not discuss Adidas, which also owns Reebok, because it trades on the German Deutsche Boerse in Frankfort as part of the DAX 30. They do trade an American Depository receipt (ADR symbol is ADDDF), but with very little data provided.

So lace up those sneaks and boots and get ready for some fall hiking. The leaves in the Northeast USA are beautiful this time of year.

  Happy Hiking and Running,      Freewilly.


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