Crocs: What to do when ugly goes out of fashion
Today's Financial News - Posted October 30, 2009
Crocs (NASDAQ:CROX) made its money by selling unique, but ugly shoes. What do you do now that ugly is no longer in fashion? The short answer: SELL!
By Andrew Snyder, TodaysFinancialNews.com
Baltimore – (TFN): I am a firm believer in the power of diversification, but even so, I often find myself asking, “Would I want to rely solely on this stock for my entire financial well-being?”
A healthy dose of speculative plays is not only a good idea for all but the most conservative portfolios, but I feel it is downright mandatory.
However, investors need to realize the difference between speculation, gambling and flat-out sticking a torch to their money and burning it.
The maker of those ugly, but yet somehow popular shoes, Crocs (NASDAQ:CROX) falls firmly into the latter category. You are better off cutting a check to the whiskey-filled bum on the corner than offering a bid on this stinker.
Will work for whiskey
With shares down by more than 10% today (from yesterday’s eerily symbolic closing price of $6.66), I am hoping investors start to realize this company is just another one-trick pony.
Sure, the company’s shoes have garnered an almost cult-like following over the past years. But what’s next?
The jelly-like product line has been stretched as far as even the most creative of product designers could imagine and competition is quickly eroding a once unique lineup. Yet investors believe the company is somehow going to return to mega-profitability.
It’s not going to happen.
A company that turns some $720 million worth of sales into a loss of $185 million had better find something new to hock real soon or investors buying shares at today’s $6.00 asking price are going to be pretty disappointed over the next few years.
Let me put it another way.
Many investors lump a has-been company like Crocs in with the speculative up-and-down world of biotechs or start-up technology firms.
But these companies have a shot at something new. A new cancer drug. New wireless technology. A way of making things more efficient.
The most exciting thing Crocs has done all year is offer a camouflage pattern. Whoopdeedooo….
The market of the last eight months is gone. You can’t simply throw a dart and pick a winner any more. With investors finally questioning the strength of the rally, it takes real fundamentals and above-average growth potential to demand a premium.
Right now, Crocs is nowhere close to being worth six bucks a share. Four, maybe. But there is a whole lot of better companies actually making money trading for much lower prices.
Speculation is one thing. Ignorance is a whole different game.
Next Article: Earnings season: Why does it look so different?
3 Responses to “Crocs: What to do when ugly goes out of fashion”
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October 31st, 2009 at 11:03 pm
Disclosure?
November 2nd, 2009 at 11:14 am
Aas with every information product TodaysFinancialNews.com publishes, none of our editors has any vested stake (long or short) in any of the companies we write about.
That’s the rules.
November 3rd, 2009 at 8:30 am
I bought a few thousand shares of Crocs stock when it was just under $3.00. I sold it for just over $7 and plan to re-invest. This company is going places, you’re living under a rock. Look at their new product line and they are debt free. Are you kidding me!