Crocs: A Declining Business Can Still Be Attractive if Priced Right
"Stock number one is probably going to make you guys chuckle just a bit. It's Crocs. Yes, those really awful but very practical shoes that a lot of men love to wear. People love to joke about them. But guess what? While people may be laughing, Crocs has quietly become one of the most profitable footwear brands in the world, boasting an industry-leading 59% gross margin. What does that mean? Every Croc they sell, almost 60% of it is profit for them."
The speaker highlights Crocs' impressive profitability despite its offbeat reputation, noting its high gross margin and strong free cash flow generation. The commentary implies that even a declining business can represent a good investment if acquired at the right price.
Crocs Appears Attractive at Low Forward P/E
"If I was only buying Crocs today and you were getting it for about a six price to earnings multiple on a forward basis, that'd be a phenomenal stock to buy. Problem is you're also getting Heydude. That has been a disaster for the company."
The speaker emphasizes that Crocs, trading at a forward P/E of about six, is an attractive buy despite the dilution from the Heydude brand, which has negatively impacted the overall company performance.
Trade Call: Buy Crocs (CROX) for Brand Revitalization and Buyback Yield
"there are a lot of stocks in big draw downs and this is one of them. I actually don't have the exact numbers here. It's a company here that we've talked about and I'm breaking one of my rules on investing in apparel. I am buying Crocs and I listed in the Substack chat. I just wrote out a little I didn't do a full newsletter. I think I'm going to do one here shortly on the company and why I'm buying. I don't know the exact allocation. Again, I'll do that in the newsletter which the link will be directly in the show notes. I just have a couple of lists of what made me want to buy a little bit of an invest versus then investigate scenario where I've followed the company for many years but I don't have like my full-on model and write up and thoughts fleshed out."
Brett unveils an actionable trade call to buy Crocs (CROX) despite typically avoiding apparel stocks. He cites brand revitalization efforts, strategic ambassador partnerships, and strong buyback yields as key catalysts. Although he has not detailed his full allocation or long-term model, his invest-versus-investigate approach suggests high conviction in the turnaround story.