Personalizing Your Portfolio
AnnaLisa is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
Designing your own clothes is just a dream to most people. A trend to customizing thanks to the internet is expediting dreams. Famed venture capitalist John Doerr told Business Week as long ago as 2005, "There's this large trend -- I think the next trend in the Web, sort of Web 2.0 -- which is to have users really express, offer, and market their own content, their own persona, their identity...I mean like apparel is a way we express our identity, how we dress, the music we listen to."
Several companies are ahead of this curve, especially when it comes to footwear: Nike (NYSE: NKE), Zazzle (privately held), and V.F. Corp (NYSE: VFC) There are sites devoted to customizing your own shoes. Four of the biggest brands making it easy to design your own distinctive kicks are owned by Nike and VF Corp; Timberland and Vans owned by VF Corporation and Nike and Converse owned by Nike. Maybe you remember Crocs (NASDAQ: CROX) with its individual Jibbitz, snap on charms that personalize the shoes and are still quite popular.
Nike is really the size 13 shoe in the space with its Nike ID platform in which the possible permutations of design are almost as individual as snowflakes. It also offers ways to customize Converse shoes. There is Nike ID personalization for babies. Seriously, it's so cute I provided the link.
Nike is also at the forefront of techwear as I've written before with their Nike + Fuelband, a wristband with accelerometer, which does everything a pedometer can do and much more allowing you to sync with a device like an iPhone and compete against your friends.
Nike has been adding shareholder value with several strategies in the last year, shedding its Cole Haan and Umbro divisions, splitting the stock, vowing to "personalize" Chinese merchandise and sell off inventory there. Nike is trading at a pricey P/E of 24.62 and a PEG of 2.00 with only a 1.60% yield. I don't like-y Nike here and would wait for pullbacks, especially when companies like Apple are trading at half the P/E and offering a slightly higher yield.
Speaking of likes, though, Women's Wear Daily just reported which shoe companies have the most Facebook likes and the big winner was...drumroll please...Nike, and by a huge margin since one of the other names on their list was Converse, a subsidiary of Nike, with their football shoe and basketball shoes as well, taking it over 40 million likes.
Whether you give credence to Facebook likes as a metric of performance, at the very least it shows positive opinion of the brands and brand awareness and a cult-like following for Converse.
Vans' The Man
Vans, the sneaker company and subsidiary of VF Corporation, was also a Facebook winner and has a similar slavish following as Converse. Vans and Timberland may have been two of VF Corporation's most popular recent acquisitions (7 for All Mankind jeans are doing quite well, too!).
VF Corporation has five main brand divisions: workwear (uniforms), outdoor & action sportswear, jeanswear, VF imagewear, and contemporary comprising 35 different brands. They were also recently in the rag trade news for offering java infused jeans to ameliorate cellulite and as a bidder for surfwear company Billabong.
VF Corporation is a Dividend Aristocrat having raised dividends for over 25 years and at the last earnings release in October raised it 21% for a 2.30% yield They also raised guidance with an expected 17% rise in EPS predicted for the full year and gross margin expanded to 46.7%. The current P/E is 16.97 with a forward P/E of 13.94 and a 1.41 PEG. The company is reporting again on February 15.
Crocs is Surprising
Unbelievably, based on P/E and PEG, 9.80 and 1.08 respectively, Crocs may be the value name here. With only 420 retail outlets and 92 web stores the name has plenty of room for expansion and only has some 4,157 employees so it's a lean operation compared to the 44,000 workers at Nike and 58,000 at VF Corporation.
For earnings on February 18, expect in line numbers if October's guidance is any indication. When the company reported Q3 earnings in October it boasted expanding margins to 54.4% and surprised beating EPS expectations bringing in $0.49 per share above estimates of $0.43. For more than 12 quarters Crocs has been surprising as analysts seem unable to shake off the memory of share price decline of years past. The hot, hot stock cooled off in 2008-9 plunging from a high in the $60s to below $10. The stock is still off almost 30% from its 52 week high of $22.59.
Crocs operates five main brands, crocs@Work, crocsRX (shoes for foot problems), Ocean Minded (sandals, espadrilles and regular Crocs), crocs Golf, and the aforementioned Jibbitz. Investors might be surprised to learn the crocs@work segment is beginning to compete with VF Corporation with work shoes and scrubs for the healthcare line as well as offering footwear for hotel, casino, airlines, restaurant, and healthcare industries. Investors may still think solely of the antimicrobial signature footwear but boots, dressy flats, and more have been part of the mix for several years.
Analysts have a mean price target of $18.00 with the high target at $28.00. On December 5 coverage was initiated by Imperial Capital at Outperform. Analysts expect a 5 year EPS growth rate of 10% (yoy).
Let's Wrap It Up
Nike is a solid performer but is expensive here. It is doing so many right things that investors have every right to want in on the stock but please wait. VF Corporation is also making some interesting moves with its personalization and functional jeans but Crocs is the upstart that may make the most profits going forward.
leglamp has no position in any stocks mentioned. The Motley Fool recommends Nike. The Motley Fool owns shares of Crocs and Nike. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!