When considering potential investments, Warren Buffett, chairman of Berkshire Hathaway
I've long argued that DeckersOutdoor
Though perhaps ephemeral, it does appear that Uggs' popularity has lasted longer than many (myself included) believed. Ugg boots were recently featured on Oprah Winfrey's TV show as "one of her favorite things of 2005." Deckers' stock was then highlighted on the CNBC show Mad Money. It has almost doubled in the last 30 days: Oprah Winfrey and Jim Cramer are an undeniably powerful combination.
Given this recent rebound in the stock, the question with Ugg is whether this product is in fact more of a Barbie than a pet rock, or whether the recent exposure from Oprah and Jim is simply the final, euphoric indication that the fad has peaked. I'm standing my ground and continue to believe that Ugg will be a short-lived phenomenon.
If I'm right, I believe the intrinsic value of this company is about $200 million, or $16 per share, about half of its current value.
However, if I'm wrong, the stock should trade with a valuation that is on par with comparables. Brown Shoe
Despite the fact that I no longer have a position in the stock, this is a story that I'll watch closely as it unfolds. As my wife will readily confirm, I'm by no means an expert on fashion. But I still think that by this time next year, the popularity of Ugg boots will have waned, Oprah and Jim will move on to the next hottest thing, and the stock will be trading closer to $16 than to $40 per share. Stay tuned.
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Fool contributor Salim Haji lives in Denver and owns shares of Berkshire Hathaway, but does not own shares in any of the other companies mentioned.