FR: Mixing Friends and Stocks Foolishly

Article: Mixing Friends and Stocks Foolishly

Up next in my “Fool Revisited” series is a piece on one of my favorite companies, though I don’t know if I’d consider them a great investment anymore. Under Armour (NYSE: UAA, NYSE: UA) will make multiple appearances throughout this series, and a lot of those articles will have talked about inventory levels and revenue growth and all that. But for now, my second published article was influenced by my friend Shawn and his appreciation for the clothing manufacturer based out of Baltimore, MD.

Prior to my time at the Fool, I had spent countless hours while deployed to Iraq discussing stocks and investing with Shawn. While I had invested previous to these conversations, Shawn had a different perspective on investing, a perspective I would learn to appreciate once I was schooled in the “Foolish” mindset upon my arrival in Alexandra for the Writer’s Development Program. His adoration for Kevin Plank, founder and CEO of Under Armour, is an example of using qualitative information when choosing an investment, though it should also be only one factor when choosing companies in which to invest.  

Here’s the ancient tweet announcing my article back in the day:

Had an investor purchased and held onto Under Armour after the publication of my article – which didn’t really have a direct buy recommend but was generally positive – they would be a fairly happy investor, though not nearly as happy had they just bought an S&P 500 fund. The compound annual growth rate (CAGR) and total growth of the S&P 500 outperformed Under Armour from article publication (August 12, 2011) through the end of December 2017:

Stock Start Price End Price CAGR Total Growth Value of $10,000
Under Armour $7.97 $14.43 9.73% 81.05% $18,105
S&P 500 $1,178.81 $2,673.61 13.67% 126.81% $22,681

Source: Yahoo! Finance & author calculation; Stock prices include dividends & stock splits; Under Armour data for Class A shares (NYSE: UAA)

Under Armour has had some issues over the past few years, and don’t seem to be the investment darling that they were back when I was closely following the company. A stock split that further consolidated Kevin Plank’s control of the company soured a lot of investors, and the company’s stock performance as suffered. Slowing revenue growth led to a 50% sell off during 2017, and it’s hard to know for sure if the company will ever recover to its once lofty heights – it is currently 72.7% below its September 2015 all-time split-adjusted high of $52.92 – but it could also be a bargain at these prices should revenue growth pick back up again. I for one will be paying close attention to the stock leading up to its next earnings report in March, as well as in future posts about the company in this series.

Until next time…

Disclaimer: I do not own currently own shares in Under Armour, but I purchased shares on behalf of my mother within the last six months, which she no longer owns. I also have no plans to purchase shares within the next 60 days in any account in which I manage investment funds. You can read a little about my personal investment philosophy here.

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