skx

Investment Analysis Clubs Saul’s Investing Discussions
1

In the spirit of moving on from the BOFI conversations, I repost an earlier comment on SKX. Any thoughts on SKX getting the momentum back?

SCTY’s stock cratered last er and has come back up like a champ:

http://finance.yahoo.com/echarts?s=SCTY+Interactive#{“showArea”:false,“showLine”:false,“showCandle”:true,“showSma”:true,“smaColors”:“#cc0000,#0000ff”,“smaPeriods”:“50,200”,“smaWidths”:“1,1”,“smaGhosting”:“0,0”,“lineType”:“candle”,“range”:“ytd”,“allowChartStacking”:true}

SKX was hit hard on the most recent er, down 30% or so on a rev and eps miss. Momentum has definitely slipped away from this once hot name. SKX now carries a forward pe of 14 and a trailing pe of 21 while the Dec qtr estimates call for rev growth of 22% and eps growth of 50%. Currency issues are a big problem for SKX w/ much of the rev [and much of the growth] coming from overseas. Shares short are now 13% of the float. Based on their past track record of meeting or exceeding estimates and hot growth in China SKX may very well regain its momentum this next er [due mid/late January].

[Above #'s from Capital IQ]

And SKX chart:

http://finance.yahoo.com/echarts?s=SKX#{“showArea”:false,“showLine”:false,“showCandle”:true,“showSma”:true,“smaColors”:“#cc0000,#0000ff”,“smaPeriods”:“50,200”,“smaWidths”:“1,1”,“smaGhosting”:“0,0”,“lineType”:“candle”,“range”:“ytd”,“allowChartStacking”:true}

Any chance for SCTY like rebound?

2

Also in the spirit of getting back to fundamental investing methods…
Saul,
I was wondering if you could share more about how and when you shift from a stock that has not been moving much to one that has grown to be a more likely candidate for stock price growth. Do you move only 20% or 50% out of a stock for these moves?
I’ve been active over the last 5 months and have still not recovered from the multiple hits on the high growth stocks I own, but have finally got my portfolio to ones I am very happen to stay with thru the ups and downs. Now I am struggling with how much and when to move allocations when I see what I perceive as an opportunity. ie. seems like moving out of SKX since it is stagnant and likely won’t have significant movement till next earnings in February and moving more funds into something like INFN or LGIH would be a great move right now. Then the question is how much to move. Measuring the level of conviction on MY belief that SKX will remain range bound for a month would lead me to want to temporarily move ALL out and into others that ARE moving.
I think ALOT of your success is on the timing of these transfers of funds among your portfolio and not just being in the right stocks.
What is your typical adjustment like?

Trying to learn, as others have posted, to improve my methods over my lifetime. Talking with everyone along the way makes it fun too!

4 Likes
3

Well, looking at Sketcher’s chart, it looks like the run-up to over $50 per share was just a bout of irrationality. But, just ignore that hump and the price chart still looks delicious. Two years ago, it was trading for a tad over $11 per share. One year ago, it was trading at about $19 per share. And now, after the ‘slump’, it is at $30 per share.

That, folks, is a freakin’ GREAT gain of almost 200% in two years, and an amazing 50% gain in a year where the price was hammered.

When a stock becomes a favorite of the mo-mo/IBD crowd, one slip-up can lead them to abandon that stock like it has the plague (or even innuendo and rumor – see “BOFI” as an example). That happened to SKX this summer… but big deal! It is still a stellar company, executing exceptionally well, and providing very positive guidance. I think it has the power to continue a strong run.

I doubt anyone would be disappointed with a 50% gain each year for the next few years. :slight_smile:

Tiptree, Fool One guide, long SKX

7 Likes
4

Tiptree - I agree with EVERYTHING you said. Let me explain that my question about selling SKX was a temporary sale. I want to continue to own it long term, but Saul follows a philosophy of always staying 100% invested and has said he will move from a stock that has held flat to one that has been hit down hard to take advantage of the buying opportunity. I was only wondering how much he transfers in those situations. If you have conviction that some other GREAT stock you already own is now a great buying opportunity, it makes sense to move more of your funds to that one. Just wondering about more specific details of how Saul executes that method of investing. How often on average he makes transfers (daily, weekly, monthly), how much of a stock he typically moves over (10%, 30%, 50%) when he acts on those opportunities?

5

I was wondering if you could share more about how and when you shift from a stock that has not been moving much to one that has grown to be a more likely candidate for stock price growth. Do you move only 20% or 50% out of a stock for these moves?
I’ve been active over the last 5 months and have still not recovered from the multiple hits on the high growth stocks I own, but have finally got my portfolio to ones I am very happen to stay with thru the ups and downs. Now I am struggling with how much and when to move allocations when I see what I perceive as an opportunity. ie. Seems like moving out of SKX since it is stagnant and likely won’t have significant movement till next earnings in February and moving more funds into something like INFN or LGIH would be a great move right now. Then the question is how much to move. Measuring the level of conviction on MY belief that SKX will remain range bound for a month would lead me to want to temporarily move ALL out and into others that ARE moving.
I think ALOT of your success is on the timing of these transfers of funds among your portfolio and not just being in the right stocks.

That was a very good question you asked about how I adjusted my position in SKX. Sorry it took me some time to research it. As far as what I did in SKX, here it is

Skechers hit a high at about $53.50 some months ago. I sold a small amount (maybe 2% of my position) at $51.30 or so because I felt my position was getting too big. Then SKX reported “terrible news” for the Sept quarter (missed some analyst’s estimate) and the price dropped to $25 or so (?!). It’s now at $30.

Let me quickly give you a capsule of how SKX has been doing. People got all hung up about the price having tripled or so in a couple of years, and said that it was in a bubble. I’ll give you some figures and let you decide for yourself if they had been in a bubble and how bad their results were:

Their earnings went like this:

2012 — 06
2013 — 39
2014 — 100

And their earnings for the first nine months of 2015 are up 70%. In other words, they already have $1.38 for 2015 (which is 38 cents, or 38%, more than they had all last year, and they have another quarter to go). Their adjusted trailing earnings are $1.56. If you are paying attention, that means that they will probably have earnings of very conservatively, at least $1.65, up 65% for the year.

How about revenue? (In billions of dollars)

2012 — 1.56
2013 — 1.85
2014 — 2.38

From 2013 to 2014 they were up 29%. In the first 9 months of this year they were up 34%, and they already have more revenue than they had all last year. Backlog was up 28% from a year ago. Comparable sales were up 10.4% last quarter. Their adjusted PE is under 20.

I bought additional shares from $26 to $32 with an average price of about $29.75. The additional amount I bought was about 25% of my then current position (or about 20% of my now current position. I haven’t sold any down at these prices. It was my second biggest position and more than 15% of my portfolio, or I might have added a larger percentage of my existing position.

I hope this helps

Saul

15 Likes
6

I’ve been active over the last 5 months and have still not recovered from the multiple hits on the high growth stocks I own, but have finally got my portfolio to ones I am very happen to stay with thru the ups and downs. Now I am struggling with how much and when to move allocations when I see what I perceive as an opportunity. ie. seems like moving out of SKX since it is stagnant and likely won’t have significant movement till next earnings in February and moving more funds into something like INFN or LGIH would be a great move right now. Then the question is how much to move. Measuring the level of conviction on MY belief that SKX will remain range bound for a month would lead me to want to temporarily move ALL out and into others that ARE moving.

I’m not Saul, but I’d like to make a comment.

It is much easier to determine if a stock is likely to increase in value than it is when it is likely to do so. Warren Buffett said if someone offered to wager on whether a company’s stock price would increase the next day he wouldn’t take the bet. But in the long run, that is figuring out a company’s fortune over the span of year, he can do that with almost 100% accuracy. So exactly why would a company be range bound for a month? Why not two weeks, or four weeks, or six weeks?

Benjamin Graham, Buffett’s teacher said in the short run the market is a voting machine, in the long run it is a scale.

Trying to successfully move in and out of a position on a monthly or even a quarterly basis is incredibly difficult to do. It is almost like being a successful day trader and I strongly caution against it. Saul is an exceptionally sophisticated investor and is very generous in sharing his thoughts with us. But make sure that the decisions you make are based on the performance of the company not on the action of the price. Saul makes his decisions after thoroughly reading the 10ks and listening to the conference calls. His decisions contain more nuance than is possible to describe in a post. In other words, he weighs, he doesn’t vote.

Finally, 80% of the appreciation of your holdings will come on just 20% of the trading days. For example, one day earlier this year my shares of Amazon jumped 25%. That’s right, multi-billion dollar, heavily traded Amazon appreciated 25% in a single day. If you trade in an out of stocks on a monthly basis you are likely to miss those moves. Even if every single trade is successful you are still very likely to minimize your returns.

One of the most effective weapons an investor has is time. Be patient and it will work for you.

I see you have been spending some tome one boards. That’s great! Spend enough time to synthesize the opinions you read into your own style. This is just mine.

Good luck.

Jeb
You can see all my holdings here: http://my.fool.com/profile/TMFJebbo/info.aspx

26 Likes
7

Brilliant advice, Jeb!

Thanks,

Jim

8

Thank you Saul. That does help. I was more interested in general of how adjustments are made than what specifically happened with SKX. It sounds like your adjustments are attempting to maintain an approximate relative percentage across your portfolio. When SKX rose you dropped it back down a bit to not be overweighted in one stock and when SKX dropped you added more to bring it back to a higher percentage of the overall portfolio again. But that means you were selling other stocks to buy in to SKX. That is the step I was struggling with. I went to move funds from my higher conviction and higher funded stocks to lower conviction stocks at smaller positions because they have had significant price reductions for no apparent reason. The thinking was, well since SKX doesn’t seem to be going anywhere right now, maybe I should move out of that temporarily into these other stocks. I understand that the “temporarily” is a big unknown time duration.

9

Thanks Jeb! I tell my daughters all the time that trying to time the market is a losing game and that as you said, only a handful of the days of the year contribute to the annual gains. If you miss those days it is a big opportunity loss.
Thanks for reminding me to practice what I preach. I especially noted your point about TIME being on our side and to be PATIENT.
(It is more fun trying to time it though) :wink:

2 Likes