Cramer is going through the clothing racks in celebration of Fashion Week to find the bargains that are worth owning. He went to Perry Ellis , but the stock just doesn't have it. He went to Ralph Lauren , but that had a big earnings miss last quarter that is keeping Cramer away. So what’s left? It’s time to pay a visit to the Calvin Klein rack – which, to Home Gamers, means Phillips-Van Heusen.
PVH is a company that, unlike Ralph Lauren, consistently delivers the earnings it’s supposed to, Cramer said. And unlike Perry Ellis, it has the brands people actually want to wear. In fact, PVH is a bundle of strong brands, not just Calvin Klein. The problem with a stock like Ralph Lauren is that it’s levered entirely to one brand. What happens if that little pony goes out of style? So, too, goes the stock. But PVH is diversified. In addition to Calvin Klein, PVH licenses other popular brands including Kenneth Cole, DKNY, Michael Kors and Joseph Abboud. With that kind of diversification, PVH is unlikely to get hurt and miss its numbers just because one of them stumbles, Cramer said.
PVH also has what Cramer looks for in any stock: international exposure. It licenses the Calvin Klein brand overseas and it’s looking to maintain a 50/50 split between the rest of the world and the domestic business for that brand. Calvin Klein is seeing double digit growth, but more importantly, PVH as a whole has a 17% long term growth rate but the stock trades at just 14.5 times forward earnings. Cramer regards that price as a steal, not a discount. His rule is that any stock with a PE multiple lower than its growth rate is a cheap stock. PVH is cheap and it has fundamentals that are sound and not in decline.
If you want exposure to fashion, Cramer thinks you need PVH. And thanks to the beating the market took Wednesday, PVH is down to $55 and change – a good entry point, Cramer said, although you should always wait five days before picking it up to allow yourself to do the necessary homework.
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