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Get First Class Returns by Riding Coach
Posted by: Dr. Paul Price (IP Logged)
Date: December 27, 2012 09:18AM

Aspirational leather goods designer/manufacturer Coach (COH) got creamed in Wednesday’s trading when overall retail sales numbers showed poor year-over-year growth. COH dropped $3.39 per share (-5.89%).

The stock is down $25.53 (-32%) from the 52-week high of $79.70. Does that mean that earnings have been bad? Fiscal year 2012 (ended June 30, 2012) came in at $3.53, an all-time record. The first quarter was up 5.5% from a year ago.

The company is net debt free. Dividends were initiated in 2009 and raised each year since. The current quarterly payout is 30 cents for a yield of 2.22%.

That’s the highest ever on this remarkable growth stock. A look at their past 10 years tells you just how well Coach has performed.

Coach suffered its only down year in fiscal year 2009 due to the Great Recession. EPS dipped all of 7.3% (from $2.06 to $1.91). Buyers who bought during the second half of that decline snared a triple in one year and an ultimate shot at 600% gains.

Shoppers that would die to buy Coach merchandise at one-third off are passing up pretty much that same discount on the shares.

The only way to get great values on high-quality stocks is to buy when things look temporarily depressed.

If you are worried about being too early, consider this 13-month combination buy/write out to January 2014.





I was a buyer of Coach shares today.



Disclosure: Long Coach shares


Stocks Discussed: COH,
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Re Get First Class Returns by Riding Coach
Posted by: cdubey (IP Logged)
Date: December 28, 2012 04:17AM

The problem with luxury companies is that when they are in fashion, they command a lot of gross margin but when they go out of fashion then they are "discounted".

Coach look like a great company, no debt, ~ 55% RoIC, ~$1b in FCF but quite frankly it is expensive. The price reflects 11% growth rate in the next 10 years, 4% terminal growth rate with discount of 12%.

If it is not expensive, it is not cheap either.

I would feel more safe buying around $45.


Stocks Discussed: COH,
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Re Get First Class Returns by Riding Coach
Posted by: Cornelius Chan (IP Logged)
Date: December 28, 2012 12:40PM

Which is a better stock for the long run?

1. Coach (COH)
2. Guess? (GES)
3. LVMH Moet Hennessy Louis Vuitton (LVMUY)

With a little back-of-the-napkin analysis of the three companies, both Coach and Guess? have similar financials. LVMH has a little bit more debt.

Of the three stocks, Coach is -29% off recent peaks. Guess? is -52% and LVMH is -2%.

Since '08/'09 lows, the three stocks have the following growth...

Coach 11.80 – 54.73 → 364%
Guess? 10.88 – 24.22 → 123%
LVMH 9.30 – 36.40 → 291%

Prior to that, the three stocks had fallen -77%, -80% and -77% respectively (since their '07/'08 peaks).

Looking at these numbers, Coach looks pretty darn good. Considering the next 10 - 20 years will witness the rise of Asia's middle classes, stock of Coach should be desirable for at least that long. It will take Asia some time to come up with their own, better, luxury brands no?

IMHO, Coach at ≤$50 and LVMH at ≤$30 should be a smart dollar-cost-averaging strategy for the long term. Of course, should a crisis economy drive the stocks down to '08/'09 levels, doubling and tripling down looks like a no-brainer.



Stocks Discussed: COH,
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Re Get First Class Returns by Riding Coach
Posted by: tkervin (IP Logged)
Date: December 28, 2012 06:58PM

While I doubt you will be able to get COH sub $12 like you could in 2009, I am certainly not willing to buy at the current price.

I would be interested in another look sub 40. If I miss this boat.....fine.

This is not a fat pitch......(but I understand that articles need to be written daily or a site fades away).

The classic error is to project recent fast growth forward....


Stocks Discussed: COH,
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Re Get First Class Returns by Riding Coach
Posted by: Cornelius Chan (IP Logged)
Date: March 29, 2013 02:33PM

Tkervin,

Your sub 40 coach call is good. I like what you say about fat pitch and (not swinging).

Price has bought at 54... so he is no stock market genius on this one. I don't understand his options. But if he wants to hold COH for a 30-50% gain then not bad way to ride up a first-class stock.


Stocks Discussed: COH,
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