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I read the prospectus. I searched the internet. I Google-alerted both CROX and Crocs and saw the stories. I did my DD. I put together the spreadsheets, I went to the stores. I scoured the papers for ads. I saw the silly looking shoes. My 2 year old fell in love with them and couldn't wait to grow into a pair. She readily absorbed and recognized the Logo. Now three, she will choose to wear the "Crocodile" shoes, regardless of weather. And for those who care to know, they don't do anything for her in the snow. But in the spring of '06 - I was ready to invest in CROX. But why didn't I?

 

Let me say that I am truly happy for anyone who invested in the company, especially if they knew about the founding father's foibles. I am truly happy that the management now in place is keeping investors happy, even though they are in the apparel business for the first time. I am really happy for those who visited the website this year and saw coffee mugs for sale in the accessories portion of the web site, not a full line of Crocs, Inc logo-ed apparel. And, I am truly happy for those whose CAPS score is bigger, fatter, and full of teeth. But for Me? Those Crocodile shoes are now causing me some crocodile tears as this pick has me clenched between its jaws and is dragging me to the bottom of the river.

 

My underperform call on CROX is the biggest loser I have. CROX has doubled and pulled back since I picked it to underperform the market. But why did I pick it to underperform? And why didn't I buy at $23 right when I had some money? The decision to call underperform came after an attempt to be rational.

 

I could make a bull and bear case - the bear won out because I just couldn't invest in the company because there is no apparent long-term moat. Style is fickle and shoes that by necessity have to have air holes just can't adapt.

 

Traditional shoe companies can adapt their lines to fit the latest in styles, Crocs just can't. Like their namesakes, the shoes will probably be around for ages in essentially the same form as when they evolved, but their ecosystem will be limited and their competition will encroach upon their territory. Sure, crocodiles can handle fresh and salt water and chew up anything smaller, but their numbers decrease in any ice age. The shoes just can't adapt.

 

That was the reason for the call: Long term thinking. And in the short-term, it has been the bane of my CAPS existence. I haven't hit end on that pick yet -- actually, I have, but I have changed my mind before market open the next day, every time. I have ended losing picks and seen the error of my stock picking ways. BUT - those crocodile tears I'm crying now will dry up; because in the end, no one will be singing songs about being buried with their Crocs on.

 

 

 

 

 

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Nice BreakerT. My girl who will be 2 in February, pretends that SHE is taking care of her dolls. Funny stuff, watching a 1 7/8 year old push a doll around in a stroller.

 

As far as getting investment ideas from kids goes, I think you've hit that on the head. If you get a chance take a look at Gymboree. We actually put our 1st boy in there.

 

He loved it. From what I remember the stock has been on fire. I'll have to check it out.

 

Best,

 

FoolishMage

 

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T. Allan,

 

Characteristically well-written, and enjoyable to read.

 

I also lost points on a CROX Underperform, as I did on a GOOG Underperform. And what I was reminded of in both cases -- "reminded," since I have learned this before -- is not to mess with innovative companies in the throes of their growth.

 

Perhaps Google IS overvalued. Perhaps Crocs is too.

 

But what unites both of these companies, and a few others besides, is that they blazed their own trail and continue to have higher expectations than where they are now. So you're left guessing at what point the music ends.

 

For innovative upstarts, even those that "look" overvalued, I prefer to short or pick Underperform once the music has CLEARLY ended. Because at that point they usually have even farther to fall, and you can make 20% or more just on that alone.

 

So, my advice: Prefer to pick BROKEN stocks to Underperform. Don't be "early" or the first to call a fad over.

 

Great to see you bloggin'. Shortly, we'll be adding RSS feeds to blogs, so that people like me can have your new entries automatically show up on my browser, as opposed to hunting and pecking.

 

Fool on,

 

David

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FoolishMage

 

Lynch investing at its finest. The kids are intuitive as to what is desirable in the marketplace. I look forward to honing my skills so that when my then teenage daughter will die without XXXX, I will be a step ahead...even if, as I with Crocs now, just don't get it.

 

David,

 

Thanks for the advice...and thanks for CAPS. This pick has been a loss-free investment lesson learned.

T. Allan

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T. Allan --

I feel the similar pain on this one as well.

Long term, I don't see the moat either...and the bear in me was winning out here.

David's comment seems to be something I really need to remember, just to pick the Broken to Underperform & not try to theorize on what's due for a breakdown...

<sigh>...living & learning...

E

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