Cramer's Mea Culpa: Skechers, Cree & Rubicon
Cramer ate crow on Friday as part of his observance of this Day of Atonement. He was coming clean for getting wrong these three stocks: Skechers USA, Cree and Rubicon.
Skechers he liked as part of the bull market in shoes, a long-term thesis he thought would protect the stock against other short-term concerns. But those concerns stirred up enough investors to sink the company’s share price. After rising to $42.04 on June 17 from $30.26 on March 8, which his when Cramer first recommended it, the stock has since plummeted to $23.22.
Why? Mainly because the company announced it was facing a class-action lawsuit that questioned the validity of the health claims for its Shape-up toning shoes. That and growing worries about lower unit volumes, increased discounting by retailers and rising competition in the toning shoe biz from Nike and Reebok. Plus, a general sense of fear about the macroeconomic picture over the summer hurt retail as a whole, including Skeckers.
Still, Cramer thinks stock is a buy. The long-term story is still intact, he said, and there’s little downside left in SKX. Plus, according to analysis from Wedbush, even a complete collapse in the toning-shoe category leaves Skechers with $8 of cash per share and growth to spare. And even a puny 10 multiple on this stock puts the share price at $25, a buck higher than its present level. So while Cramer admitted he got this one wrong once, he’s willing to stick with it given these other positives.
Cramer wouldn’t sell Cree or Rubicon at these levels either, but he’s not exactly a buyer of them either. He’d recommended the stocks as plays on the switch from incandescent bulbs to more energy-efficient LED ones. But the specter haunting their performance was exposure to another LED segment, the backlighting screens and mobile phones. Cramer knew these stocks traded on this backlighting business, but thought the bigger theme—green energy—would carry them above it. Not so, apparently, as Cree and Rubicon are down 26% and 18%, respectively, from his initial recommendations.
The play on these stocks then is to wait until the Street recognizes that energy efficiency matters more to earnings than backlighting.
“That’s when we’ll get the bottom,” Cramer said.
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