Rule One Investing Blog

In my last article I talked about how KSwiss’s current stock price is currently below the margin of safety. Therefore, it’s important to delve deeper into this company immediately. As soon as you find a stock below the Margin of Safety I think it’s important to analyze the company to determine if it’s worth putting on your possibly buy list.

What is KSwiss?

Kswiss is a company that designs, develops and markets high performance footwear and apparel. As well, they market and design casual footwear. Which is how I know KSwiss. I know KSwiss from products like the shoe to the right.

Who are the consumers?

From the company description it looks like the consumers are sports fanatics and the modern teenager to young adult. As we know these people are large consumers.
Where can I buy KSwiss?

I like to do is determine where people can actually buy the product. I find that this is especially useful for retail stocks. If you can’t get a specific brand at certain stores / locations then this shows some sort of block in the moat or management. Looking online you can buy KSwiss from Foot Locker and Eastbay.com. On ebay there are over 300 items when searching for KSwiss

How’s the Management?

This is always the toughest question. However, if we look at the annual report from 2007 we can see that the CEO seems like a straight shooter.

The athletic footwear industry is highly competitive. There are several marketers of footwear larger than us, including Nike and adidas. Each of these companies has substantially greater financial, distribution and marketing resources as well as greater brand awareness than us.

We have increased our emphasis on product lines beyond our Classic model. In the past, we have introduced products in such highly competitive categories as court, boating, outdoor and children’s shoes. See “Products.” There can be no assurance that we will penetrate these or other new markets or increase the market share we have established to date.

The principal elements of competition in the athletic footwear market include brand awareness, product quality, design, pricing, fashion appeal, marketing, distribution, performance and brand positioning. Our products compete primarily on the basis of technological innovations, quality, style, and brand awareness among consumers. While we believe that our competitive strategy has resulted in increased brand awareness and market share, there can be no assurance that we will be able to retain or increase our market share or respond to changing consumer preferences.

 

Those are the sort of remarks that I can relate to meaning, “we can’t be assured that we’re doing these things, however, we believe this approach might work.”

What about the CEO, Steven Nichols?

Well, Mr. Nichols seems like our kind of player. He’s been on the board since 1987. He also holds a LARGE amount of stocks, over 70% of the voting power stocks. In addition, he only took 1 million as compensation for his work on the board.

Finally, KSwiss has a conference call on Tuesday to report the fourth quarter earnings of 2007. This should give us a great idea of the outlook for 2008. Furthermore, it’ll show us what kind of management we have. I’ll be sure to watch carefully on Tuesday.