Coach: Why Big Returns Could Be In The Bag

While Michael Kors is all the rage when it comes to the investment community, investors should not overlook the current opportunity that exists in Coach. With shares trading seemingly on the cheap, Coach is poised to take advantage of red hot growth in China. Keep your eyes on this iconic fashion designer for outsized future returns that may be in the bag!

Jan 27, 2014 at 5:00PM

China's population of $1.3 billion and counting remains a vast frontier of untapped potential for many companies around the world. This is nothing new, but what should grab your attention is how a company like Coach (NYSE:COH) is driving further into the People's Republic with incredible success, almost humorously divergent from their recent progress in the good old USA. With Wall Street abuzz over the company's terrible North America performance over the past several quarters and seemingly stifling competition from Michael Kors (NYSE:KORS), investors should take note of the iconic Coach brand for potentially out-sized returns.

A world of opportunity
According to Coach CEO Victor Luis, China is on track to meet annual guidance of $530 million in sales through their fiscal year end in June. While we don't have a sales forecast of the other units to more appropriately compare the business' China segment to other geographies, we can can get a rough estimation of the role China currently plays in Coach's operations and the massive potential the lies ahead by comparing to last year's results, especially since NA is experiencing a sales decline and the non-China international operations seem largely flat.

Source: Capital IQ

As you can see Coach's international operations made up about one third of the company's total sales. Within that one third, China only accounts for about one third of international sales, or roughly slightly better than one tenth of overall sales. And with these sales expanding at a 25% clip in its most recent quarter, it's clear the company is only in the early innings of its China expansion.

With a burgeoning population whose discretionary spending power is also on the rise, China will likely continue to serve as a powerful growth catalyst to Coach's cash flow for many years to come.This could be an opportunity for long-minded investors seeking to take advantage of the company's current woes at a what appears to be an opportunistic share price.

COH Price to Free Cash Flow (TTM) Chart

COH Price to Free Cash Flow (TTM) data by YCharts

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Michael Finarelli has no position in any stocks mentioned. The Motley Fool recommends Coach and Michael Kors Holdings. The Motley Fool owns shares of Coach. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

4 in 5 Americans Are Ignoring Buffett's Warning

Don't be one of them.

Jun 12, 2015 at 5:01PM

Admitting fear is difficult.

So you can imagine how shocked I was to find out Warren Buffett recently told a select number of investors about the cutting-edge technology that's keeping him awake at night.

This past May, The Motley Fool sent 8 of its best stock analysts to Omaha, Nebraska to attend the Berkshire Hathaway annual shareholder meeting. CEO Warren Buffett and Vice Chairman Charlie Munger fielded questions for nearly 6 hours.
The catch was: Attendees weren't allowed to record any of it. No audio. No video. 

Our team of analysts wrote down every single word Buffett and Munger uttered. Over 16,000 words. But only two words stood out to me as I read the detailed transcript of the event: "Real threat."

That's how Buffett responded when asked about this emerging market that is already expected to be worth more than $2 trillion in the U.S. alone. Google has already put some of its best engineers behind the technology powering this trend. 

The amazing thing is, while Buffett may be nervous, the rest of us can invest in this new industry BEFORE the old money realizes what hit them.

KPMG advises we're "on the cusp of revolutionary change" coming much "sooner than you think."

Even one legendary MIT professor had to recant his position that the technology was "beyond the capability of computer science." (He recently confessed to The Wall Street Journal that he's now a believer and amazed "how quickly this technology caught on.")

Yet according to one J.D. Power and Associates survey, only 1 in 5 Americans are even interested in this technology, much less ready to invest in it. Needless to say, you haven't missed your window of opportunity. 

Think about how many amazing technologies you've watched soar to new heights while you kick yourself thinking, "I knew about that technology before everyone was talking about it, but I just sat on my hands." 

Don't let that happen again. This time, it should be your family telling you, "I can't believe you knew about and invested in that technology so early on."

That's why I hope you take just a few minutes to access the exclusive research our team of analysts has put together on this industry and the one stock positioned to capitalize on this major shift.

Click here to learn about this incredible technology before Buffett stops being scared and starts buying!

David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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