Under Armour Sinks To All-Time Lows!

For people who think getting in on Initial Public Offerings (IPOs) are almost guaranteed wins, you have to look no further than Snapchat (SNAP), Twitter (TWTR) and now Under Armour (UA).

You see, it's one thing for a company to make a product that you're excited about and its another thing for that company to be run well, profitable and fundamentally sound. Sometimes you should just buy or use their product/service and not their shares. That's been the case for the above mentioned companies.

We dodged the bullet on every one of these while others got caught up in the IPO hype and they bought simply because they had a neat product that they liked. In fact, some of the worst, common investing advice I've heard is to "buy what you like and use". That's just stupid, to put it bluntly.

No doubt Under Armour has made some neat clothing, etc. but as a company, it's fundamentally weak. https://finance.yahoo.com/quote/UA/key-statistics?p=UA

UA Key Statistics | Under Armour, Inc. Class C Stock - Yahoo Finance

It's only a $5 billion company (so not huge) with a forward P/E (price-to-earnings ratio) of 25. So even its projected earnings are expensive even with its stock price at 52-week lows and all-time lows.

They only made $526 million last year (which isn't a lot for a $5 billion company). But the big kicker for me is that they've got a measly $165 million in cash on their books. They can burn through that quickly if they don't get things turned around.

They just cut their earnings guidance for the rest of this year so they're telling investors that things aren't going to be turned around anytime soon. So why would you want to own a company with weak fundamentals and a dour outlook? Yet people stumbled over themselves to own the shares because they knew the Under Armour brand and liked it. Yet they knew nothing about their fundamentals.

Let me ask you...What do you buy that you know NOTHING about? You don't buy a house that way. You don't buy your next car that way. Yet people put a car's worth or a house's worth of money into a stock that they know nothing about. They research the former and don't research the latter. I've never understood that.

It's one of the reasons why I write the Logical Investor newsletter is so that investors can make informed decisions and steer clear of crappy stocks, fundamentally.

Just think of all of the people that were itching to buy Under Armour the first day or two it traded publicly, hoping it would go to the moon. Yet, why should it with fundamentals like it has? It shouldn't. So they've seen their stock go from the $40's, to the $30's through the $20's and now into the teens.

At some point, can it get a speculative pop higher here and there? Sure. But for it to sustain a nice uptrend, it's going to need improved fundamentals as a company and not just have cool products that it sell.

Come join me in the Logical Investor. I believe you'll feel like you've gotten a college education in the stock market over time. You'll go from not knowing why you're buying a stock to being very informed as to why a stock is good or bad and you'll know why you're in it.

God bless!

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