The maker of Ugg boots and Teva sandals defied expectations in 2013. At the end of 2012, Deckers (DECK) stock was in a bit of a tailspin. The worry was that consumer trends might be trending away from its products. Uggs had enjoyed a strong run, but perhaps that run had come to an end. From a valuation perspective I thought differently and made Decker one of my One-Year Sizzlers. I’m glad I did, as the stock is now up 109% for the year.
Can we expect a repeat performance from Decker in 2014? The contrarian story is now gone, but the brands might continue to sell. Will they sell enough to lift shares further? Analysts on average expect Deckers Outdoor to grow profits by 20% in 2014. At current prices, shares trade for 18 times 2014 estimated earnings. That is a very small discount to the expected growth rate, suggesting that shares could climb further in 2014. The big “if” is that any change in consumer behavior could result in the stock dropping hard. The valuation is not compelling enough, given the risk when looking at the stock for next year.
The truck-fueling company had a volatile year – mostly to the good side. Before the year was five months old, the stock jumped above $12 per share. That was good enough for a 155% gain. It would have been easy to say sell at that time, but such timing is nearly impossible to get away with. Instead I let these One-Year Sizzlers do their thing – for the entirety of the year.