Michael Kors backpack

September 25, 2017

We invested in Michael Kors just before Christmas, but sold early in March after a 41% rise in its share price.Its shares are now back down to the level we bought in at previously and we’re ready to do this all over again.We expect Michael Kors will have had a good quarter and will at least match analyst expectations.With the market expecting the worst, this could cause the share price to fly.Our investment in Michael Kors (NYSE:KORS) was one of the most profitable we’ve had with a 41% gain earlier this year. As its share price has now somehow managed to drop all the way back down to our previous entry point, we feel quite confident that it is time to do it all over again.We picked up shares in Michael Kors just before Christmas and held onto them until the start of March for incredible gains, as demonstrated below. The recent sell-off in Michael Kors appears to be unjustified and we see the share price as a gift at the current price. So much so, we wouldn’t be surprised to see the shares produce yet another 41% gain in the near future.

So why did its shares lose all these gains? Well, let us first explain why we sold out. We sold our shares purely for profit. When a share price goes beyond our expectations we more often than not will exit our position and look for new undervalued shares to invest in. This strategy has served us well in the past, and hopefully it serves us well again in the future. We never expected it to drop back down to this level, but we can’t hide the fact that we’re pleased to be able to pick up shares so cheaply once again.Billionaire Stephen Mandel of Lone Pine Capital is bulking up on the fast growing retailer Michael Kors (NYSE:KORS), per a 13D filing with the SEC last week. The Lone Pine investment firm has nearly $20 billion in public equity funds and recently upped its stake in Kors by 30% to 10.49 million shares.

Going into 2Q, Mandel had some robust company as big believers of Michael Kors. This includes Viking Global, which owned 12 million shares. Other notable billionaires include Steve Cohen’s SAC Capital (3.2 million shares), Ken Griffin’s Citadel Investment Group (2.9 million) and John Griffin’s Blue Ridge Capital (2.1 million) – collectively owning just over 15% of the company.Kors IPOed at the end of 2011 and since then has been on a tear, up nearly 200%. The company continues to lead the way in fashion apparel and accessories. Despite the robust run up in Kors’ stock and its 35x P/E, the stock is still quite a “buy.”The company has a 50% return on invested capital, generates $330 million in free cash flow, and has no debt. Kors also has a $750 million net current asset value (current assets less total liabilities).Its business model is simple yet elegant. Design great looking clothes and purses. The company has an impressively diverse product portfolio with not more than 30% of revenues being derived from a single segment:

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