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Company name Deckers Outdoor Corp
Stock ticker DECK
Live stock price [stckqut]DECK[/stckqut]
P/E compared to competitors Good

MANAGEMENT EXECUTION

Employee productivity Fair
Sales growth Good
EPS growth Fair
P/E growth Fair
EBIT growth Poor

ANALYSIS

Confident Investor Rating Fair
Target stock price (TWCA growth scenario) $66.6
Target stock price (averages with growth) $84.99
Target stock price (averages with no growth) $65.39
Target stock price (manual assumptions) $65.99

The following company description is from Google Finance: http://www.google.com/finance?q=deck

Deckers Outdoor Corporation designs footwear developed for both high performance outdoor activities and everyday casual lifestyle use. The Company markets its products under three brands: UGG, Teva, and Sanuk. The Company sells its products, including accessories, such as handbags and outerwear, through quality domestic and international retailers, international distributors, and directly to end-user consumers both domestically and internationally, through its Websites, call centers, retail concept stores and retail outlet stores. In addition to the Company’s primary brands, its other brands include TSUBO, a line of casual footwear; Ahnu, a line of outdoor performance and lifestyle footwear; MOZO, a line of footwear that combines running shoe technology with work shoe toughness for individuals that spend long hours working on their feet, and Hoka, a line of footwear for all capacities of runner designed to alleviate fatigue, impact and muscle strain.

 

Confident Investor comments: At this time, I think that a Confident Investor can cautiously invest in this stock as long as the price is correct. Most of the fundamentals of this company are good but there are some concerns. I am leaving this company on my Watch List but you should use a bit more caution compared to other Watch List companies.

If you would like to understand how to evaluate companies like I do on this site, please read my book, The Confident Investor.

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Earlier, I wrote about using the system described in my book, The Confident Investor, to build up your investment in Deckers Outdoor Corporation [stckqut]DECK[/stckqut]. I discussed how much your investment would have risen compared to the traditional method of “buy-and-hold” as an investment strategy.

At the time that I wrote the article, I hadn’t discussed portfolio management on my site to any great detail. Recently, I discussed the concept of doubling your investment to the point that the free stock is equal to one allotment of your portfolio. Now that this concept has been explained, I need to add another metric to the Deckers [stckqut]DECK[/stckqut] analysis.

If you would have invested in Deckers as described in that article, you would have doubled your investment by March 2, 2007. On that date, you would have acquired 150 shares of DECK which were valued at about $67.45 for a total profit of $10,101.75. This means your $10,000 initial investment would have doubled.

This event would have occurred 292 trading days after you initiated trading on DECK. If you followed my advice on portfolio management, you would stop trading in DECK at this point and focus on other stocks to build up equity in them.

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Many readers have reached out to me to ask about how to run a balanced portfolio. This article is designed to help you with general guidelines for developing such portfolio. A balanced portfolio should be 20-40% in index funds and 60-80% in individual stocks spread out among many industries. This allows you to have exposure to the general market, the international market, and the growth of truly well-run companies. The proportion of money between index funds and individual companies should be dictated by your age and how soon you will need the money to pay for life’s expenses.

The first thing to do is invest 20 to 40% of your portfolio in index funds. Divide these index funds into at least four categories:

  • international funds
  • bonds funds
  • small-cap or mid-cap funds
  • large-cap funds

I suggest that you balance your fund investments equally every year. This means that you would have 5% of your portfolio in each fund category. You may have to annually add money from the individual stock 80% of your portfolio to maintain at least 20% index fund exposure.

It really doesn’t matter which company manages the index fund you choose. There is some variation in international funds since they can track many different markets so you may need to study a bit for that component. There is little true variation in bonds funds so just find one that tracks the Barclays Capital Aggregate Bond Index. For the stock index funds, they should track one of the S&P indexes or one of the Russell indexes.

If you are over 65 then you may want to start dropping down to 60% of your portfolio being in individual stocks and 40% index funds. You definitely want to consider this if you are over 75 years of age. However, if you are under 65 then you probably should have a portfolio of stocks that is approximately 80% of your portfolio. At 65 you may think you need to be more cautious but there is a high probability that a 65 year-old person is going to live to be 90. If you have reached the glorious age of 75 then you are even more likely to live to 90.  With 25-45 more years of spending to do, you really need your money to continue to grow even if you are retired. As you approach 80 or 90 years, you may want to have a more even mix of stocks, bonds, and money-market cash. To understand this better, check out my whitepaper, Retire In Luxury.

Divide 80% of your portfolio into equal allotments that are larger than $5,000 per allotment. You should have at least 10 allotments in a balanced portfolio. You could have 20 or 30 allotments depending on the size of your portfolio. If you do not have $50,000 to divide 10 ways then divide your existing portfolio into $5,000 increments. You will find that you are much more efficient and profitable if you invest $5,000 or more using GOPM. If you have fewer than 10 allotments, be very diligent about getting a good mix of industries so that you are not overly hurt by any one trend.

Regardless of the number of allotments that you choose, you need to choose twice that number in stocks that you are tracking.  So if you have 10 allotments, you should track 20 stocks. This allows you to always have a stock that is rising to invest your money. Invariably, some of your tracked stocks will be going sideways or down but by tracking double the number you need, you are likely to have 10 that have upward momentum.

You should plan on investing in 10 to 30 companies at a time using the tools that I show in The Confident Investor. Grow your investment in any individual stock until you have doubled your money using GOPM (Grow on Other People’s Money).

When you have doubled your money in half of your companies, you may want to consider changing your allocation size to a larger allocation. This will allow you to continue to grow your investment in those great companies.

It is also possible to stop investing in any given company at half of an allotment or twice allotment depending on how you feel about that company. You should also factor the number of companies in the same industry you already having a portfolio. For instance, if you have 2 companies in nearly every industry except you only have one mining company, feel free to allow that mining company to grow to a double allotment. Similarly, if you have 3 software companies in your portfolio then you may want to limit one or all of them to a half allotment so that your portfolio is not overweight in that category.

Let me show you an example of a 50-year-old man (we will call him Bob) that has been able to save $150,000 in his IRA account.

  • $7,500 in an international index fund
  • $7,500 in a bond fund
  • $7,500 in a small-cap  or a mid-cap fund
  • $7,500 in a large-cap fund
  • $120,000 divided into 10 allotments of $12,000 each.  This means that Bob will purchase up to $12,000 in any stock on the 20 possibilities.

For the 20 stocks, Bob chose the following from the Confident Investor Watch List:

Apple Inc. Technology – Personal
Akamai Technologies Technology – Internet
Ansys, Inc. Technology – Enterprise Software
Atlas Pipeline Energy
Caterpillar, Inc. Manufacturing – Machinery
Chipotle Mexican Retail – Restaurant
Cirrus Logic Technology – Semiconductor
Deckers Outdoor Footwear
Ebay Inc. Retail – Web
Extra Space Storage Real Estate
Goldcorp Inc. Mining – Gold
Google Inc. Advertising – Web
Hms Holdings Corp Healthcare – Services
Helmerich & Payne Energy
Merck & Co., Inc. Pharmaceutical
Net Servicos de Comunicacao Telecommunications – International
Priceline.com Inc. Retail – Web
Boston Beer Alcohol Beverages
Washington Banking Finance
Yum! Brands, Inc. Retail – Restaurant

Bob will invest in these companies as indicated by the technical indicators described in my book, The Confident Investor.  You can purchase my book wherever books are sold such as Amazon, Barnes and Noble, and Books A Million. It is available in ebook formats for Nook, Kindle, and iPad.

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Company name Deckers Outdoor Corp
Stock ticker DECK
Live stock price [stckqut]DECK[/stckqut]
P/E compared to competitors Good

MANAGEMENT EXECUTION

Employee productivity Good
Sales growth Good
EPS growth Poor
P/E growth Good
EBIT growth Good

ANALYSIS

Confident Investor Rating Good
Target stock price (TWCA growth scenario) $30.52
Target stock price (averages with growth) $45.49
Target stock price (averages with no growth) $48.26
Target stock price (manual assumptions) $32.48

The following company description is from Google Finance: http://www.google.com/finance?q=deck

Deckers Outdoor Corporation (Deckers) is a designer, producer, marketer, and brand manager of footwear, apparel, and accessories. Deckers markets its products under three brands: UGG, Teva and Sanuk. The Company sells its products, including accessories, such as handbags and outerwear, through domestic and international retailers, international distributors, and directly to consumers both domestically and internationally, through its Websites, call centers, retail concept stores and retail outlet stores. In addition to the Company’s primary brands, Deckers’ other brands include TSUBO, a line of casual footwear that incorporates style, function, and maximum comfort; Ahnu, a line of outdoor performance and lifestyle footwear, and MOZO, a line of footwear that combines running shoe technology with work shoe toughness for individuals that spend long hours working on their feet. On July 1, 2011, it completed the acquisition of the purchased assets of the Sanuk brand.

 

Confident Investor comments: At this time, I think that a Confident Investor can cautiously invest in this stock as long as the price is correct. Most of the fundamentals of this company are good, in fact the company ranks as a Good company, but there are some concerns with the price of the stock.

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I recently read an article on CNN Money advising investors to invest in consumer product goods (CPG) companies. The logic was that CPG companies, as a group, have several features that should be appealing to investors:

  • Predictability – these companies can predict how much of a product can be sold in the short-term so they control pricing and inventory well.
  • Dependability – these companies are not going to see massive drops in revenue since consumer purchase their products regardless of the economic climate.
  • Pricing power – due to their brand loyalty, these companies can put forward regular price increases with little negative market reaction.
  • Global reach – while most of CPG companies get the bulk of their revenue in the western world, many have made significant investments in emerging markets.

The problem with the article is that the cited companies were fair at best, and some were poor. Instead of the CPG companies in the article, I suggest that you look at good companies such as Coach [stckqut]coh[/stckqut], Decker [stckqut]deck[/stckqut], Boston Beer [stckqut]sam[/stckqut], or Fossil [stckqut]fosl[/stckqut] (all of these companies are currently on my Watch List). If you want to own one or two of the companies in the article, P&G [stckqut]pg[/stckqut] (the stock symbol is not PR as cited in the article) or Unilever [stckqut]ul[/stckqut] are decent candidates – both companies are very well run.

Settling for companies that are familiar to you and you see on the grocery shelves may not be a good investment strategy.  I suggest that you focus your portfolio on companies that have more upside potential but are still very well run.