It's been a long time -- 13 years to be exact -- since the Philadelphia Eagles were NFC Champions. So while we'll bask in the glow of yesterday's victory, anxiously awaiting Super Bowl LII, it's time to get back to work today.
The last time the Eagles won the NFC, shares of Fossil Group (FOSL) were trading in the $28 range, 180% above Friday's close. While shares of the beleaguered watchmaker ultimately topped out in the $130 range in 2012/2013, it's been all downhill since. Last year was dreadful with shares falling 70% to end the year at levels not seen since 2001. The numbers have just not been there, guidance has continued to weaken, and most investors want nothing to do with this dinosaur (pun intended). Most investors, however, is a term that does not include those of us who will sometimes buy what no one else wants, seeing value in what appears to be trash.
Typically these situations do not bear fruit quickly, if at all. However, Fossil is seeing some positive activity early in this New Year, and shares are up nearly 30% year-to-date. While early on in the month that could have been due to investors taking advantage of last year's dip, exacerbated by tax-loss selling in a year that it was difficult to find losers to offset gains, Friday's move was different.
Shares were up 10% on the day, on about two and a half times normal average volume, as rumors of a private-equity takeover began circulating. The number making the rounds was $15.75/share, a 73% premium to Thursday's close. This rumor, founded or unfounded, may have made some shareholders happy, but not this one.
First, as stated previously, I am not used to instant gratification when taking a position in a down and out name, and actually prefer that stories play out more slowly. This permits time to slowly build a position in names where it does not make sense to go all-in at once.
Second, if the rumors are true, $15.75/share is a lowball offer in my view. In truth, I say that about all of the names I've owned that have been taken out, with the most recent examples being Ruby Tuesday, West Marine, and Krispy Kreme.
This is all (again, if there is anything to it) happening too quickly and I'd rather see Fossil afforded some time to right the ship, if that's possible. The rumors don't surprise me; there's a lot of cash out there these days, and the iconic, well-known, desirable brand names are being swallowed up left and right. Plus, even after Friday's bump, FOSL's enterprise value is still only $800 million, small potatoes to a bigger fish that wants to build out its brand portfolio.
Another story unfolds....