Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.
What: Shares of footwear and accessories-maker Deckers Outdoor (DECK 1.23%) were back in style today, jumping as much as 11% on reports that its ubiquitous UGG boots appear to be a holiday season favorite.
So what: Two analysts today affirmed their bullish views on Deckers, which also makes Teva and Sanuk footwear. Ronnie Moas of Standpoint noted that the soft sheepskin boots were the most-researched item this holiday season after the Kindle and the iPad. The stock had also been heavily shorted, setting up a short squeeze with nearly half of the stock sold short. The winter storm earlier this week in the Midwest and Northeast may also boost sales for the boots. Shares had tumbled by more than half this year on concerns about slowing sales growth, as UGG is the company's most valuable brand, and wholesale revenues made up nearly two-thirds of total sales in 2011. Deckers' fortunes are clearly tied to UGGs.
Now what: Fashion is always a tricky investment, and predicting the tastes of young women, UGG's target demographic, seems like a fool's errand. Arguably, the once high-flying stock is a steal now at a P/E of 9, but I see UGG's as ultimately a fleeting trend rather than something to stake your retirement savings on. The stock could easily move higher from here, but I'm too cautious to play this one.
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