To change the subject...
I don't normally look for "beaten down" stocks for value investing, but I'm intrigued with what is going on with the audio accessory maker Skullcandy (SKUL) at $13.85.
It has rapidly growing revenues (30%+/year), no debt, and serious brand recognition. They beat each quarter earning estimate since then. Even assuming it loses some margin and market share, the forward PE <12 with est. earnings of $1.17. Recent insider buys are substantial, and it is rated a buy by the pundits. Their plan calls for expansion into Europe and Asia this year.
So far, it looks like a promising stock, but there is a huge question: why does it have such a large short position? Shorters expect them to fall, and have been expecting them to fall since they went public a year ago at $20. Given that it bounced off it low of $12 five times over the last year, I would have thought shorts would have covered by now.
The best explanation I've read from the short side is that "they make headphones, and headphones are a commodity". That argument sounds hollow to me. Coke makes sugar water. That doesn't make it a bad investment. I've read substantially all discussions of the stock on the internet, and just don't see the downside.
Given that the company's earning look set to continue climbing for at least a few years, and that they are protected by a very good brand strategy, I'm betting that it will go up from here.
A short squeeze along the way would be a bonus.
Any thoughts? |
