essays pieces of the puzzle
Saturday, October 13th, 2012
in fashion

Michael Kors (KORS) is a “global luxury lifestyle brand.”  Four buzzwords, so it must be good.  The stock certainly has been good since its IPO late last year.  Good enough to make the twenty percent return on the market look like a flat line.

The bottom panel of the chart shows that earnings expectations have basically doubled since the company came public.  The top panel illustrates that earnings and guidance have propelled the stock.

It also shows that two secondary offerings have been done, netting selling shareholders a cool $2.4 billion.  While each deal was announced before positive guidance, they were executed hard on the heels of that guidance.  (Hat tip:  @JFinDallas.)

So, how would you analyze this stock?  It has a limited life as a public company, with some evidence of a promotional bias.  Check out the page after page of risks in the prospectus if you want, but you know the big ones:  macroeconomic risk, fashion risk, operational risk, and key man risk.

It’s already a $10 billion market cap and all the fundamental analysts that follow it have buy recommendations on it.  The estimated growth rate is 30% and it’s selling for 35 times the next twelve months’ worth of earnings.

To the point of the item below, if you were an analyst or portfolio manager, how would you analyze this?  What angle would you take to gain an edge?  How can you add value versus the crowd?

When an item is in fashion, it’s easy to get caught up in the moment.  (Chart:  Bloomberg terminal.)

changing research

It’s the start of a new series on the original site, concerning many different aspects of equity research, including some that maybe you haven’t considered.  First off is a look at the sell-side research product of today — and about changing research.

Of course, that phrase can be interpreted to mean that the research environment is changing — or that it is time to go about the process of changing research as we know it.  This posting is about both.