Michael Kors (KORS)
From Cabot Wealth Advisory 3/23/15 Sign up for Cabot Wealth Advisory—it’s free!
By Michael Cintolo, Vice President of Investments and Editor of Cabot Market Letter and Cabot Top Ten Trader
From Cabot Wealth Advisory 8/29/13 Sign up for free Cabot Wealth Advisory
The market took a turn for the worse on Tuesday, when fears of a military strike on Syria walloped the indexes and most stocks. I wouldn’t get caught up in the reasons for an advance or decline; it’s better to just go with what the market is doing. And by my measures, the intermediate-term trend is now down, which tells me to pare back some and wait for the buyers to return en masse.
That said, all is not lost. First, sentiment has switched pretty quickly; just 38% of newsletters are now bullish, the lowest figure since last November (when the market was in a bottom area). That’s not a reason to be complacent, but it is a good sign.
Second, and more important for my style of investing, growth stocks are acting well; more than a few reached new highs this week and remain in good shape. Of course, if the market continues to skid, many of today’s resilient names will get dragged down for a time, but the fact they’ve held up well this long is a good sign.
My stock pick for today’s Wealth Advisory is Michael Kors (KORS), a stock I’ve recommended in Cabot Market Letter for more than a year. In recent weeks, the stock has broken free from a long consolidation. Moreover, it continues to act well, and it appeared in Cabot Top Ten Trader back on August 12. Here’s what I said in that issue:
“We’ve been waiting months for Michael Kors to decisively get going, and that time has finally come. The stock is now one of the strongest in the market because, after yet another fantastic quarterly report, more big investors are convinced Kors is the next Coach. For the second quarter, sales ramped up 54% (including a huge 27% hike in same-store sales growth) and earnings surged 79%, both trampling expectations. While wholesale revenues remain a big piece of the pie (45% of revenues, growing at a rate of 59%), the retail side of the business has huge global potential. The firm owns and operates 328 stores and concessions today (with another 114 operated by licensing partners), and in the years ahead, it believes there’s room for another 150 in the U.S., 150 in Europe, possibly a couple hundred more in Japan and 400 more smaller shops focused on watches and jewelry! Combine that with the aforementioned huge growth in same-store sales, and it’s likely Kors’ sales and earnings can grow at rapid rates for many quarters to come. All told, Kors has developed into one of the hottest brand names in fashion, and as long as management continues to make the right moves, we think the stock will head higher over time.”
If the market gets hairy, I could see KORS pulling back to 65 or so, which is where it broke out. But so far, it’s shown little desire to go down for more than a few days; the stock is currently just a couple of points shy from all-time highs! I wouldn’t advise jumping in with both feet given the market’s tenuous position, but starting with, say, half your usual amount (dollar-wise) here or on weakness could work, with the idea of buying the rest if/when the market kicks back into gear.
In the meantime, I recommend that you take a risk-free subscription to Cabot Market Letter, to get my latest advice on not just Michael Kors but on other high-potential stocks in my portfolio.
By Paul Goodwin, Editor of Cabot China & Emerging Markets Report
From Cabot Wealth Advisory 11/24/12 Sign up for free Cabot Wealth Advisory e-newsletters
Michael Kors (KORS) came public in December 2011. And unlike most young stocks, which need a little time to organize their first real rally, KORS blasted off from its IPO price of 20 and didn't stop until it hit 50 in March. It's easy to understand why, as the company's revenue growth--58% in fiscal 2011 and 62% in 2012--has been phenomenal.
And the most recent quarter featured 74% revenue growth and 96% earnings growth!
Michael Kors is working the luxury end of the spectrum with apparel, footwear and accessories that are sold on both the retail and wholesale levels.
After a five-month consolidation that found support at 37, KORS popped to new highs again in August, and has been digesting those gains with support at 50. I think, over time, it could be another Coach.
Michael Cintolo, Editor of Cabot Market Letter and Cabot Top Ten Trader
From Cabot Wealth Advisory 10/11/12 Sign up for free Cabot Wealth Advisory e-newsletter
It's tough market out there--most growth stocks and the major indexes have been consolidating/correcting for a month now, and with earnings season just getting started, volatility is sure to remain high.
That said, I'm not waving the white flag; in fact, by my measures, the intermediate-term trend is still pointed up and, despite plenty of pain in recent days, most leading stocks have thus far found support above or just below their 50-day moving averages.
That doesn't mean the market can't break wide open--anything is possible. But as I frequently write in Cabot Market Letter, it's best not to anticipate what may or may not happen--instead, just go with what has actually happened. To this point, we've seen a tedious retreat that hasn't caused a boatload of breakdowns, and the major (longer-term) trends are still pointed up.
Thus, I've pruned some exposure during the past couple of weeks, but I'm also not burying my head in the sand--I'm keeping up a list of enticing stories and charts for when the selling squall passes. One name in my Model Portfolio that has held up well is Michael Kors (KORS), a company I feel could be an emerging high-end retail giant.
Instead of going into detail about the company's wares, what investors need to focus on is its truly remarkable growth across the board. In the quarter ending in June, Michael Kors' wholesale revenues boomed 66%, while licensing revenues gained 61%; combined, those two made up about half of the firm's quarterly revenue.
But it's Michael Kors' retail segment that really gets me excited--revenues there grew 76%, and at the end of the quarter, Kors had 253 stores compared to 177 one year before. Amazingly, sales at stores open at least one year grew a ridiculous 38%! That might be the biggest number we can ever remember ... except for the current quarter: Kors has already pre-announced great results, with same-store sales up 45%!!
Of course, the company doesn't have anything revolutionary; this is no cancer cure or new way of doing business. But I see something akin to Coach (COH) circa 2003 ... a company with an outstanding brand name and management that is still early in its growth phase.
Technically, KORS just came public late last year, had a huge run in January, February and March and then based out while the market corrected. A gap higher on earnings in August led to another run, but recently KORS has consolidated, partly because of the market, but also because of a huge 23-million share offering. Those shares came from early investors who wanted to cash out--they were not new shares, so there was no dilution, and not many shares were from management.
The stock has thus far remained above its 50-day line, and it seems to have digested the offering in fine fashion. Obviously, if the market tanks, KORS is likely to get hit, but right here, I think the stock is a decent buy with big upside potential for when the bulls return.
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|Michael Kors Holdings (KORS)
Unit 1001, 10th Floor
Tsim Sha Tsui, Hong Kong
852 3928 5563
|Index Membership: N/A
Industry: Apparel Stores
Full Time Employees: 2,945
11/24/12: Michael Kors (KORS): 74% revenue growth and 96% earnings growth!
10/11/12: Michael Kors (KORS): Akin to Coach (COH) circa 2003