CNBC article: SKX CEO, We will double in 5 yrs

http://www.cnbc.com/2015/10/23/skechers-exec-to-cramer-we-wi…

I will listen to the podcast when it is available.

Side note: I got into SKX earlier this year and right now I’m at about even. So I could stay in SKX or cash out and go to something less growth-oriented, like a NKE or other dividend stock.

Karen

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Good or bad, I always enjoy a Cramer clip!

One thing: Someone needs to tell Mr. Weinberg to stop referring to Asia as “the Orient”. Outdated and definitely off-putting to many folks.

As an aside, I think the Star Wars Skechers are going to be a hit.
Don’t know about the Fool age demographic, but my two boys are frothing at the mouth about the upcoming movie!

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“So, we are feeling pretty good, and we think we have great opportunity both in this quarter, in the first quarter of next year, and still think we can double the business in the next five years,” Weinberg said…

Moving forward, Weinberg anticipated strength to build moving into the end of the year and the first quarter of next year. In particular, Skechers thinks that Europe and China will stay strong, and South America will pick up.

“We are going to grow everywhere in the world and put a lot of investment into that infrastructure to make sure we deliver well, deliver on timing, and continue to deliver those great shoes,” Weinberg added

Infrastructure costs money.

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"Side note: I got into SKX earlier this year and right now I’m at about even. So I could stay in SKX or cash out and go to something less growth-oriented, like a NKE or other dividend stock. "

Karen your thought process is understood and very human but is also about price anchoring. I got in a lot later than you and the reality is that we lost exactly the same. Even though you were ahead and are now neutral and I was neutral and now behind, both of our portfolios are so much the poorer for the drop.

The reason I bring this up is that if you think there is value in the stock you should stay whether neutral, behind or ahead and if you think that it is a damaged company then you should cash out and move on irrespective of whether you are ahead, neutral or behind. Being emotionally tied to a stock as you are behind or on the flip side leaving a good stock because you are neutral is an emotional decision that can interfere with long term portfolio returns. I am behind and could cash out and use the loss to off set gains but I believe in the company and so my new cost basis starts now.

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“So, we are feeling pretty good, and we think we have great opportunity both in this quarter, in the first quarter of next year, and still think we can double the business in the next five years,” Weinberg said…

Doubling in five years is a 15% growth rate. Not nearly as impressive as past growth. Is he signaling a slowdown?

Upon Cramer’s urging, he pretty much admitted that the stock price had gotten way ahead of the business value. It might be a much, much slower growth trajectory from here on.

Tiptree, Fool One guide, long SKX

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I was going to say, doubling in five years is good but really not all that impressive. Even the S&P can do that.

lovepeace

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Doubling in five years is a 15% growth rate. Not nearly as impressive as past growth. Is he signaling a slowdown?

I heard him say that too. Doubling in 5 years. I’m assuming he’s talking about sales. If sales double, earnings can much more than double, especially if they are making large one-time investments in infrastructure (e.g. distribution centers). Earnings increases will drive stock price appreciation.

Chris

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The thing I am going through is trying to figure out what I want to invest in, and… am I really interested in growth stocks or not. Perhaps I would prefer a dividend growth stock, or perhaps I would prefer something more slow and steady.

So my question isn’t so much about SKX as it is about whether it fits into my investing style. We were just reminded of the risk involved in the investment. SKX isn’t putting any cash into my pocket on a regular basis. I am only making money on stock price appreciation, if it happens, and if I cash out at the right time.

I know that this is also a timing thing, but I have been considering it in the past few weeks. It just happens that the drops in BOFI and SKX might cement those decisions for me.

I got out of BOFI after seeing that one of my mentors left it, seeing that Saul left it, and reading the comment from the CEO that “he wasn’t a very good auditor”, which is in my mind, a bit of a strange comment from a CEO. I have worked with a bank CEO who was extremely conservative and I could not imagine him making a public statement that sounded like that.

There are many other companies out there. The price doesn’t matter, but my opportunities for wealth building do matter. I think it’s smart to consider the alternatives.

I have been reading a blog that is very conservative and it is about value investing, so I may go more in that direction, or I may lean towards more of the not-going-anywhere companies that pay dividends.

I am not really an investor. Most of the time I am a guesser. I’d like to make the use of my money more concrete.

Karen

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The SP500 could double in 5 years depending on the start or end date.

But is unlikely to do so in the next 5 years, starting now.
All the valuation models of the SP500,looking forward 5 to 8 years point to little if any gain holding the SP 500 for that period. Note that these models have generally been useless looking ahead 6 or 8 months but fairly reliable looking ahead 5 to 10 years.

So to me the question is whether or not SKX will be a good investment over the next 5 years at present prices with a slower growth outlook. Even a double over 5 years equals a bit more than 14% CAGR, not bad.

The recent blowup in some Saul type stocks points out that no methodology is perfect, they all fail from time to time. And that when/what to sell is way harder than when/what to buy. At least for me.

Much of the more recent gains in BOFI and SKX were due to momentum buyers, who don’t care what they buy as long as it is going up. It will be a long time before they are back. Same for the “story” buyers.

Of the two I have more confidence in SKX. After all they make a product that people like- comfortable shoes. There will always be a demand for that and shoes are understandable. A couple of quarters of decent sales growth will cure a lot of the skepticism.

The pall of litigation will hang over BOFI for a long time and won’t be cleared by a few good quarters. Because while people will believe SKX numbers they my doubt the authenticity of BOFI numbers, no matter how good they are.

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I was using SKX as an example in a discussion with a friend of mine and it stimulated some questions which I would like to pass along.

Let me say up front that while I have been following along with the discussion here are SKX, particularly as compared to UA and I get why SKX could be more attractive than UA, I have no problem admitting that I know nothing about selling shoes and thus would have a very hard time investing in SKX because I would have no idea why it was going up and when it might come down.

So, the first thing I noticed looking back at the historical performance, e.g., http://stockcharts.com/freecharts/perf.php?SKX&n=200&… is that something happened after 5 August and I don’t recall if there was a discussion here or not. If one extends that chart out to 400 or 500 trading days, the shift is even more dramatic because of all the growth that precedes it. But, after that date, it seems that the momentum of the growth was broken, there was some retreat and then a lumpy flatline since.

That shift is enough to have taken it below the 50 dma
http://stockcharts.com/h-sc/ui?s=SKX
and while it had recovered back to the 50 dma before Friday, it is now below the 200 dma. Now, I don’t have a lot of confidence in such signals, but it seems like even if one is really confident that Friday’s move was an overreaction, that the movement since August was a reason to be cautious even before this happened.

One of my concerns in a situation like this … particularly since I know that I know nothing about the industry, is that I would be allowing the prior gains to make me feel good so that I wasn’t paying attention to some signals that I should be paying attention to, i.e., price anchoring.

I get that, if Friday was an overreaction, that it presents a buying opportunity, but how is it that one is sure given that the pattern of growth had already been broken in August?

Inquiring minds and all that.

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Tiptree wrote:

Upon Cramer’s urging, he pretty much admitted that the stock price had gotten way ahead of the business value. It might be a much, much slower growth trajectory from here on.

But he also said, at Cramer’s urging, that the stock price took way too big a hit yesterday. In short, it sounded like he didn’t know how to answer those questions from Cramer – which is okay, because he is a shoe operations guy and an accountant, not a stock guy.

That said, I too caught the remark about doubling the business in 5 years, and that he “still” thinks that. So yes, 15% a year is not that impressive, but if it “still” what he thinks, then all is according to plan.

Cramer features Sketchers almost every quarter. Usually the CEO is there. He was not there last night and also was not on the call. Where is he?

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So, the first thing I noticed looking back at the historical performance, e.g., http://stockcharts.com/freecharts/perf.php?SKX&n=200&… is that something happened after 5 August and I don’t recall if there was a discussion here or not. If one extends that chart out to 400 or 500 trading days, the shift is even more dramatic because of all the growth that precedes it. But, after that date, it seems that the momentum of the growth was broken, there was some retreat and then a lumpy flatline since.

I see a sudden rise in late July, followed by a relative plateau until around 20 August, then a sharp drop. That drop was not just SKX, but the Dow, the S&P 500 and the NASDAQ - the entire market. It certainly qualified as dramatic - more so for some stocks than others - but it wasn’t specific to SKX.

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may lean towards more of the not-going-anywhere companies that pay dividends

Go check out the conversations at the Dividend Growth Investments board. Long term strategy of buying very safe dividends and reinvesting until you retire and then using the income stream like an annuity. So depends how much time you have too.

Here is a recent post about starting this process…
http://discussion.fool.com/starting-dividend-portfolio-31950601…

You’re certainly right about the general market correction … I guess I was trying to forget.

And, I also suppose there is also a question of how one connects the pieces. True, there is a gap up at the end of July and then a gap down when the markets in general dropped and one could see the time between that gap down and say the middle of September as a continuation of the prior growth … before the gap up and gap down. But, after that mid September peak, there is some more fairly serious down trend … again, I guess with the market and then recovery before Friday’s fall.

So, maybe that is just exaggeration of general market movements.

But, that still leaves crossing the 200 dma.

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And that when/what to sell is way harder than when/what to buy.

I used to feel this way. After this year though I’ve changed my tune. Knowing what to buy is harder because it ties up your capital and there may always be something better. For me, selling is easy simply because you can always buy back whatever you sold.

Just my view.

lovepeace

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I have no problem admitting that I know nothing about selling shoes and thus would have a very hard time investing in SKX because I would have no idea why it was going up and when it might come down.

Oh my, you are saying that you only invest in companies engaged in an industry with which you are an authority - or at minimum, very familiar and well informed.

If I set that as a criteria for my own investing I think I would have trouble even with a bank savings account. While I agree that total ignorance is probably not good, personally I don’t believe one needs to be an expert in the industry before you invest in a company.

Take ABMD for example. When this company was first mentioned on this board, somehow I got the impression that they had developed some new stent technology. I would say that level of ignorance was not a sufficient level of knowledge in order to make in investment. After a bit more study I realized they made pumps. Very special pumps. But I didn’t feel I had to become an expert in heart disease and surgical interventions before making and investment.

For that matter, even after 30 years in IT at an aerospace firm I don’t consider myself am “expert” in either IT or aerospace. I probably have more general knowledge about these subjects than say your average shoe seller, but still not an expert.

Let’s say you’re the top expert in buggy whip design, manufacturing and marketing. And with this in-depth knowledge you invest in the very best buggy whip company out there. But it’s a dying industry (or in the example, a long dead industry). How did that expertise pay-off? Is my example too extreme? Let’s say instead you invest in a textile company specializing in carpets, call it Berkshire Hathaway, maybe that wasn’t the best investment you could have made. But if you’re a smart investor, maybe you start putting money into companies that make soda and sell insurance and carry freight on rails and . . .

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I go one step further… I have hard time making money in my industry or my employers stock… I always miss the forest since I am surrounded by the trees… I have been able to make decent return out of investing in other industries… May be because I am less emotionally connected and more vigilant because I know that I don’t know enough!! Not sure what it is but its real for me?

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