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Author: Lchenao Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 45  
Subject: Cyclical?? Date: 3/1/2001 12:46 AM
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Hi there! I am a recent fan of Osh Kosh B'Gosh. I sat down in front of the computer one day, having little to do and having already procrastinated in an abundance, so I thought I'd kill even more time by running a stock screen on the MSN Moneycentral computer.

Admittedly I am not a fan of any form of mechanical investing, and just the though of getting some program to give me a list of names based on a few numbers sent shivers down my back. I tried to make the screen as simply as possible:

ROE > 20%,
ROA >15%,
Net Profit Margin > 5%, and
P/E Ratio < 15

I didn't expect much. As usual there were very few companies that fit the bill... about 30 or so. I quickly scanned through them, seeing the usual large number of oil drilling companies (boy they are popular on my screens!). Then I saw Osh Kosh B'Gosh, and recognizing it as a brand name of baby wear that my mother and sister seem to love when buying for a young relative, I decided to investigate.

The rest, as they say, is history. On top of the nice numbers used by the stock screen, I loved the strong market share they enjoy in this field. My family tells me that they are also of high quality, and that their slightly higher cost is therefore worth it. That's music to my ears. More people buy this brand than any other, and for a higher price too! I also love the idea of GOSHA buying up around 13% or so of their stock back this coming year, and possibly more in later years. Also, I've gone to many a store to have a first hand look at Osh Kosh and their competitors, and I am impressed by their "Showcase" concepts. I would sometimes notice in big huge letters on attractive signs strewn around the store BEFORE I EVEN ENTERED IT that Osh Kosh was sold there, and when I looked real hard from a distance, I would not be able to figure out what other brands the store was selling.

But anyway, what DOES confuse me is something I read in a poorly researched analyst report on GOSHA. Obviously as you can tell I didn't respect this analyst's research talents much, but I do recognize that even a fool can sometimes be right(OK here I better say idiot, or bafoon.... fool on this website might be mistaken for being smart). They basically said that Osh Kosh's fortunes are strongly influenced by the department industry, and to come to the point, Osh Kosh is cyclical in nature.

Now to be honest I know not the first thing about cyclical industries. I don't like the sounds of them (reminds me of the automotive industry, of which I would not put a dime into). Thus, I do not know if Osh Kosh is truly a cyclical stock. A quick look at the shows me that while profits margins are up, they were actually almost at this level about 8 or nine years ago. Present management was in force since about 1990 I believe, so I don't think changes in profit margins could have changed because of them. Does this mean that Osh Kosk B'Gosh IS a cyclical stock? This info is absolutely essential for me because I used a Net Present Value of Cash Flow model to figure out the value of this stock, so if I can expect several bad years in the next 10 years, this would drastically change the calculated value of my stock. I also don't know much about retail or apparel industries, which puts me at an initial disadvantage when analyzing this company.

All opinions concerning GOSH and possible cyclical qualities are welcome. Thanks!
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