With hot weather, long, sunny days and summer soon to officially begin, this is the time of year to think about one's summer wardrobe. Which makes investors think about apparel companies.
Right now, my guru strategies are also thinking positively about apparel. Modeled on the strategies used by some of the greatest investors of all time, these are viewing several apparel company stocks as particularly well dressed.
Take PVH (PVH), for example. You may not have heard of PVH, nor think you have ever worn any of its products, but think again. Its owned or licensed brands include Calvin Klein, Tommy Hilfiger, Chaps, Geoffrey Beene, Izod, Speedo and Joseph Abboud, among others. A strategy I based on the writings of legendary mutual fund manager Peter Lynch thinks now is the time for investors to go high-steppin' in PVH stock. The most important variable analyzed by this strategy is the P/E/G ratio, which is price-to-earnings relative to growth and measures how much the investor is paying for growth. By this measure, PVH is a real buy. A P/E/G of 1.0 or less is acceptable and below 0.5 is considered in very favorable territory. PVH is in this latter place with a very low P/E/G of 0.46.
You have likely heard of Michael Kors Holdings (KORS), especially if you frequent higher-end malls and clothing stores where his eponymous clothing line is widely distributed. A strategy I based on the thinking of Joel Greenblatt is a Kors fan. This strategy uses but two variables -- earnings yield and return on total capital. It ranks each stock by each of these and then combines them into a final ranking from among the thousands of publicly traded stocks in our database. The top 50 get the strongest recommendation from this strategy, and Kors is in this coveted cohort with a ranking of 12.
Like PVH, Oxford Industries (OXM) markets apparel under a variety of labels, including Tommy Bahama, Lilly Pulitzer and Oxford Golf. Also like PVH, Oxford is a Lynch-strategy favorite, with a P/E/G of 0.78 -- not quite as low as PVH, but still in very favorable territory, while also sporting a pretty low debt-to-equity ratio, with debt equal to only about 13% of equity.
These are solid, well-positioned performers in the apparel industry. No doubt, it is a competitive industry with ample challenges, such as the strong U.S. dollar, but PVH, Kors and Oxford seem likely to come up smelling like roses, no matter how hot the coming summer.