Step Up to Deckers Outdoor

09/21/2015 8:00 am EST

Focus: STOCKS

Taesik Yoon

Editor, Forbes Investor and Forbes Special Situation Survey

It’s been tough for most stocks recently, but some industries have fared much better than others; one that has held up especially well has been footwear, explains Taesik Yoon, editor of Forbes.

Deckers Outdoor (DECK) is best known for its iconic sheepskin winter boots, UGG.

Teva offers active lifestyle footwear and is perhaps best known for its extensive line of sandals. Lastly, Sanuk is an innovative action sport footwear brand rooted in the surf community.

DECK’s shares have vastly underperformed the footwear industry, which has been enjoying a relatively strong year overall.

Yet despite growth expectations for the current year that are even more favorable than many of its peers, shares of Deckers Outdoor have not seen similar love from investors, falling nearly 30% so far this year. 

DECK is no stranger to investor skepticism. Back in 2012, slowing UGG sales incited concern that the fad over its popular sheepskin boots was dying. This drove its stock down more than 75% in a year.

However, boosted by its focus on comfort and the introduction of new product lines, UGG has transcended its fad status and has established itself as a premier lifestyle footwear brand.

Given the solid visibility for the second half stemming from strong pre-bookings in its most significant sales period, we think investors are being overly skeptical on DECK’s prospects.

With such pessimism resulting in the stock trading at a substantial discount to its peers, it has created a buying opportunity that has become too compelling to ignore, in our view.

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