Not the Only Game in Town
Stock Market Analysis Video
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UGG maker Deckers Outdoor (DECK) announced earlier this week that it’s teaming up with Patriots Quarterback Tom Brady to market its famous winter boots.
Brady, who has helped the Patriots win three Super Bowls, will now help sell UGG men’s footwear, outerwear and accessories product lines.
Deckers touted the campaign as a return to its roots, since UGGs were originally popular among California male surfers. (Brady is in fact from California.)
Analysts who follow the company raised their share price targets and upped earnings estimates for next year. This boost comes on the heels of Deckers beating analyst views for the latest quarter, with earnings jumping 24% and sales up 22%.
Editor Michael Cintolo recently recommended DECK in Cabot Top Ten Weekly, writing this:
“Success in retail footwear sales is largely a matter of brands, and Deckers owns three, two of which have high visibility. The company's top brand is UGG, a line of fashion boots headlined by the tan sheepskin numbers that appear everywhere from ski resorts to urban malls. Next comes Teva, an outdoor footwear company whose history began with the creation of the world's first sports sandal back in 1984. And then there's Simple, a line of sustainable shoes in simply hip styles. UGG is the big dog of the group, bringing in 70% of 2009 revenue via wholesale, and 89% if you count the 10% of revenue from direct retail and 9% from e-commerce sales. Teva contributed less than 10% and Simple kicked in about 1% for the same period. UGGs have been a hot fashion item for an unusually long time, which is a tribute to the company's care and feeding of the brand. The company's strategy of moving toward what its CEO calls an international wholesale distribution model promises higher margins and continued growth. One strong recommendation for Deckers is an unbroken string of annual earnings growth that stretches back to 2002. The stock got a boost a couple of weeks ago when it picked up coverage from another analyst.”
Mike urged caution when buying the stock, saying it was overextended after a great run up. The stock has only soared more this week after the Brady announcement, but could be a good buy again once it cools off a bit. So put it on your Watch List and monitor it closely.
And for more top retail stocks, check out my issue from last weekend where I discussed 10 retail stocks for the holiday season and beyond!
We’ve written extensively in Cabot Wealth Advisory (and several other Cabot newsletters) about Netflix (NFLX), which has almost single-handedly revolutionized the movie rental business. From its DVD-by-mail strategy to its online streaming movie service, Netflix has put several bricks-and-mortar video rental stores out of business.
And in the future, Netflix will clearly be concentrating on its instant streaming option: It recently announced a new streaming-only plan for $7.99 a month, while at the same time increasing the cost of its existing DVD-by-mail plans.
But not all movies are available to stream and the company’s DVDs still have to go through the mail, meaning that it can take days to receive the next one from your list. So what do you do when you want to watch a movie tonight? Go to your local grocery store (or even some McDonald’s!) and get a movie from Redbox, which lets you to check out DVDs for only $1 per night.
The red kiosks are part of Coinstar (CSTR), which first had success with its coin-changing machines in grocery stores and it has now applied this strategy to movie rentals. I wrote about the stock here in June when the stock was trading around 50. It succumbed to the market’s summer weakness, meandering for a few months, but picked itself back up in the fall and was recently recommended by Cabot Top Ten Weekly. Mike had this to say:
“As the movie rental chains have gone the way of the dodo bird, there are two winners left standing—Netflix, which has emerged as the go-to player in streaming content, and Coinstar, which has become the bricks-and-mortar replacement thanks to its more than 28,000 Redbox DVD rental kiosks. The company has been cranking out terrific growth for many quarters, and last week's third-quarter report revealed more of the same—sales and earnings up 43% and 74%, respectively, and cash flow improving significantly. Importantly, the company also said it's nearing a partnership to begin its own streaming service, but it's clear that Redbox (which makes up 80% of revenue and which grew 54% last quarter) is driving the bus right now. Impressively, management gave superb guidance for 2011, including earnings of $3 to $3.50 per share, and free cash flow of up to $200 million (or about $6 per share). It's a big story.”
Mike says the stock is a good buy in the low 60s and we think this story has definitely got legs.
And for the latest buy, sell and hold advice from Mike, check out his Cabot Top Ten Weekly, where you’ll find the latest recommendations on DECK, CSTR and other leading growth stocks.
In this week’s Stock Market Analysis Video, Cabot Market Letter Editor Mike Cintolo says that the market’s uptrend continues, and it's showing signs that its three-week correction is fading. Mike touches on some market timing issues and discusses Apple (AAPL), Priceline (PCLN), Fortinet (FTNT) and Globe Speciality Metals (GSM). Click to watch the video.
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Wall Street’s Next Big Shocker
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For these reasons, the next market move we see headed our way in the next 30 days could be the biggest shocker of 2010. My free report reveals what you must do now to protect yourself and profit. Order the Special Report now!
In case you didn't get a chance to read all the issues of Cabot Wealth Advisory this week and want to catch up on any investing and stock tips you might have missed, there are links below to each issue.
Cabot Wealth Advisory 11/29/10 – Psst, Wanna Buy Some Bone Marrow?
On Monday, Timothy Lutts discussed his recent experience of registering to donate bone marrow and why he thinks being compensated for giving bone marrow would greatly increase the number of donors. Tim also discussed a stock whose pathogen-reduction system will make the supply of blood cleaner than ever.
Cabot Wealth Advisory 12/2/10 – How to Know When to Sell Your Stocks
On Thursday, Paul Goodwin wrote about why the decision to sell your stocks can be so difficult as well as some rules to simplify the process. Paul also discussed why our banking system needs more oversight and a Chinese IPO with a great story. Featured stock: BitAuto (BITA).
Until next time,
Editor of Cabot Wealth Advisory
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