Bad Santa

Discussion in 'Politics & Religion' started by ARogueTrader, Dec 18, 2003.

  1. The following is an email sent to you by an administrator of "$$$Mr. Market$$$ is HUGE!". If this message is spam, contains abusive or other comments you find offensive please contact the webmaster of the board at the following address:

    admin@mrmarketishuge.com

    Include this full email (particularly the headers).

    Message sent to you follows:
    ~~~~~~~~~~~~~~~~~~~~~~~~~~~~

    You'd better watch out, you'd better not cry
    You'd better not pout, I'm telling you why
    $$$MR. MARKET$$$ is coming to town
    $$$MR. MARKET$$$ is coming to town
    $$$MR. MARKET$$$ is coming to town

    He's making a dump, he's checkin' it twice
    His top 5 is going to be very nice
    $$$MR. MARKET$$$ is coming to town
    $$$MR. MARKET$$$ is coming to town
    $$$MR. MARKET$$$ is coming to town

    He runs the model when you're sleeping
    He never makes a mistake
    He knows if a stock is bad or good
    so his portfolio gets fat for goodness sake
    Better be good for goodness sake

    You'd better watch out, you'd better not cry
    You'd better not pout, I'm telling you why
    $$$MR. MARKET$$$ is coming to town
    $$$MR. MARKET$$$ is coming to town
    $$$MR. MARKET$$$ is coming to town

    Today I bought KSWS (K-Swiss) at 47.59. I will sell it in 4 to 6 weeks at 55.19. Here's why I like K-Swiss.

    I know what I want for Christmas. Got love for my shoes K-Swiss. Actually, I've had a great pair of K-Swiss sneakers for almost 5 years now. They never wear out and they are great shoes. The company's website explains this. "In our opinion, there is only one reason to wear K-Swiss. It's because they are the best. If you don't believe us, (we are biased), just ask someone who wears them, or try a pair for yourself. We are only interested in making the best product available. We have a history of quality and creativity, and we continue to bring new and innovative product to the market each year. K-Swiss is not interested in paying athletes millions of dollars to try to sell you our shoes, we think the product speaks for itself."

    Forget about the shoe. Let's talk about the stock. KSWS is up 130% this year yet its PE is les than 20. Compare this to Nike's stock, which is moving up much more slowly, yet its PE is over 22. A time series regression analysis of KSWS's 52 week chart yields an amazing R-squared of 0.93. KSWS stock is climbing steadily through all kinds of market turmoil. This is great great price momentum.

    Most of the company's business comes from its Classic line of shoes, which is popular among urban teen-age boys and heavily muscled Wharton MBA's. It also designs tennis shoes, training shoes and kids shoes. The athletic footwear industry has been fairly promotional and generally difficult recently, but K-Swiss has really bucked that trend. KSWS sells its products in the U.S. through some 40 independent regional sales representatives and nine company-employed sales managers, primarily to specialty athletic footwear stores, pro shops, sporting goods stores and department stores. While not a retailer, KSWS is piggy backing on the PE expansion of some of the prime retail outlets.

    Net earnings and net earnings per diluted share for the third quarter of 2003 increased 84.8% and 90.5%, respectively, to $15,106,000, or $0.80 per diluted share, compared with $8,173,000, or $0.42 per diluted share, in the prior-year period. Net earnings and net earnings per diluted share for the nine months ended September 30, 2003, increased 73.0% and 80.2%, respectively, to $41,369,000, or $2.18 per diluted share, compared with $23,909,000, or $1.21 per diluted share, at September 30, 2002.

    Analysts polled by First Call predict earnings for all 2004 will rise to $3.14 a share. It's obvious that KSWS is going to smoke these numbers but even at today's P/E of 20, the analysts call translates to a share price of $62.80 which exceeds my sell price. Indeed, it's intrinsic value is about $78/share right now!

    The company has invested heavily on product development and advertising over the last three years. Last April, it launched an ad campaign focused on the Classic line and highlighting the K-Swiss brand. KSWS says its Classic series of leather tennis shoes (66% of 2002 K-Swiss brand footwear revenues), little changed from its original design, has become popular as a casual shoe for men and women, while continuing to sell well as a tennis shoe. In recent years, manufacturing was shifted offshore to independent suppliers, primarily in China. In 2002, about 98% of the company's footwear products were manufactured in China, and 2% in Taiwan.

    In July, KSWS forecast 2003 third quarter revenues of $100 million to $108 million, with EPS of $0.43 to $0.50. They surely made a mockery of this guidance. In fact, KSWS loves to beat their projections. It raised its guidance for the full year to revenues of about $395 million to $405 million, with EPS of $2.20 to $2.30. The company noted that it posted strong increases in both third and fourth quarter backlog. These sales growth projections are phenomenal, and for the short term, $$$MR. MARKET$$$ believes this growth will continue, unabated.

    With no long term debt, KSWS is able to use internal cash flow generation to fuel their growth. Performance numbers are extremely strong. Return on Assets is 16.7% while Return on Equity is 21.7%

    Just last week, KSWS, so confident of their near term outlook announced some very bullish actions to take place. The board announced a two-for- one stock split and said it received approvals to increase its dividend and share authorization. K-Swiss said it will pay the 2-cent, fourth-quarter dividend Jan. 15 to shareholders of record Dec. 31. The company said it will raise the annual dividend rate to 8 cents from 4 cents, on a split-adjusted basis. Here's what the boss had to say about all of that: "We are pleased that our financial performance has enabled us to increase the quarterly dividend for the fourth time in the last five years as well as splitting our stock for the third time in the last five years. This dividend increase reflects K-Swiss' ongoing commitment to maximizing our stockholders' investment and the confidence we have in the continued growth of K-Swiss."

    Commenting on the record third quarter results and outlook for the fourth quarter, Steven Nichols, Chairman of the Board and President, stated, "The enduring strength and appeal of the K-Swiss brand were once again very evident in our better-than-expected results for the quarter."

    Sure, $$$MR. MARKET$$$ looks good in his K-Swiss sneakers when he's at the gym curling 150 lbs while his 19" biceps look like they are going to explode. More importantly, look at the feet of the teenagers at your local high school. The buyers of America want to get the inner city groove on. Got love for my shoes K-Swiss.

    Santa is probably got his K-Swiss classics on right now as he is whipping the elves into shape as he sits in front of the TV with his ice cold Heineken ready for the bowl games to start up. Here's another Christmas present for you sports fans...Tonight is Miami (OH) vs. Louisville. Santa loves the chalk and is laying the 14 points on Miami (OH) who is the class of the mighty MAC as they will shred a Louisville team who just wants to go home for Christmas.
     
  2. KSWS is trading at a post split 26.89. Bad Santa is up 13% in less than 3 weeks.

    I have 46 consecutive profitable trades of 15% or better.

    I am HUGE! Bring me your finest meats and cheeses.

    Happy New Year!