I'm going to the ICR conference next week; A look back at eight stocks I passed on and one I recommended; Ukrainian art exhibition and auction ends today

1) On Sunday, I'm flying to Orlando to attend the annual ICR conference...

At the event, more than 200 public retail, restaurant, and consumer companies meet with analysts and investors over two days.

Every half hour from 8 a.m. to 4 p.m., three to five companies present or do "fireside chats" (Q&A sessions with an analyst) in one of the ballrooms and, separately, do small-group breakout sessions.

I go every year because I find it to be a very efficient way to see a lot of companies, get up to speed on ones I know, and hear the pitches for ones I don't.

Last year, across three of my daily e-mails in January, I wrote about eight of the most interesting companies I saw... so I thought it would be interesting to take a quick look at what has happened to their stocks over the past year.

In my January 11, 2023 e-mail, I had quick takes on five companies, writing:

• Crox (CROX), On Holding (ONON), and Planet Fitness (PLNT) are wonderful growth stories – but their stock prices reflect this.

• Titan Machinery's (TITN) earnings have soared thanks to strength in the agricultural sector, which has taken its stock to all-time highs. Though it's trading at reasonable multiples (0.6 times sales, 7.2 times [earnings before interest, taxes, depreciation, and amortization ("EBITDA")], and 8.8 times trailing earnings), I worry it's cyclical at peak earnings – and I have no insight into whether/when the cycle might turn.

• Similarly, MarineMax's (HZO) earnings have exploded since the pandemic hit, though the stock has been cut in half since reaching an all-time high 18 months ago. As a result of these two factors, the stock appears ridiculously cheap at 0.3 times sales, 2.4 times EBITDA, and 3.6 times trailing earnings. Maybe that's cheap enough to be interesting, but I worry that the slowing economy may crush sales of expensive new boats.

As you can see from the chart below, I was right to pass on these stocks... All but one – On Holding – have underperformed the S&P 500 Index:

In that same e-mail, I also took a closer look at Helen of Troy (HELE). The company owns numerous well-known brands – such as Oxo kitchen products, Hydro Flask water bottles, Pur water filters, Revlon hair dryers, Osprey backpacks, and many more. As I wrote:

The company has been around since 1968 and, as you can see from the 30-year stock chart below, HELE shares have had a wild ride: from $4 to nearly $30 from 1995 to 1998, then down to $5 in 2001, back to above $30 in 2004, back down to $10 during the global financial crisis, and then an enormous run up to $254 just over a year ago – but then they tumbled to a low of under $90 in October and closed yesterday at $111.50:

My takeaway from this chart is that investors who have historically bought after the stock has pulled back substantially have been very well rewarded...

As you can see in this chart of the company's revenue and operating income since 1994, Helen of Troy has been an incredible growth story:

In summary, I'm going to do more work on the company because it appears to be a high-quality, well-managed, shareholder-friendly business whose stock has taken a beating due to what may be short-term factors (this is where I'll focus my research).

I ended up taking a pass on this stock as well after reading this short pitch posted on ValueInvestorsClub on March 16, 2023, which concluded:

Helen of Troy is a levered rollup of undifferentiated brands and was a COVID beneficiary. The rollup story is unwinding as accelerating organic revenue declines (-20% last quarter) and higher cost of capital leave the business with no capacity to buy future revenue and earnings. The company is levered 3.5x with EBITDA already declining double digits. Downside is 50%+.

HELE shares are actually up 25% since mid-March and are roughly flat from a year ago, but I'm still not tempted:

2) In my January 12, 2023 e-mail, I wrote at some length about Container Store (TCS). Here's an excerpt:

On Monday I watched Container Store's presentation at the ICR conference. I remember the company from nearly a decade ago when I shorted the stock not long after its IPO in late 2013, when it briefly traded above $40 per share.

It was a great short, as shares crashed 90% over the next two years to $4 (and today they sit near that level, closing yesterday at $5.14)...

Today, the stock, with a mere $260 million market cap, appears incredibly cheap on trailing metrics, trading at 0.7 times revenue, 3.5 times EBITDA, and 3.9 times trailing earnings.

The problem is that... Container Store's earnings are declining from a pandemic-fueled peak.

As such, I noted that the big question was where the decline would end. As I continued:

Analysts currently expect the company to earn $0.85 per share in fiscal 2023, ending in March, declining to $0.78 the following year. That means the stock, at $5.14 per share, is trading at only 6.6 times next year's earnings.

If analysts are right and Container Store stabilizes earnings around $0.80, then the stock will probably do reasonably well because, based on where the stock is trading today, investors clearly doubt analysts' estimates.

And if the company is actually able to grow earnings, the stock could be a double or triple, given how low expectations are.

As such, I'm going to do some more work on this company... but I'm approaching it with a fair degree of skepticism, as this stock smells like a value trap.

My fears of a value trap were well founded, as Container Store has lost money the past two quarters and is expected to lose $0.21 per share in the fiscal year ending March 30, 2024. As you can see in this chart, the stock has been cut in half since I saw the company at the conference – trailing the S&P 500 by 70 percentage points:

This still smells like a value trap, so don't be tempted to bottom fish here...

3) Lastly, on January 18, 2023, I analyzed Wolverine World Wide (WWW). Here's an excerpt:

Turning to another company that caught my eye at the ICR conference in Orlando last week...

Wolverine World Wide owns a portfolio of shoe brands, the top five of which account for 73% of sales: Merrell, Saucony, Sperry, Wolverine, and Sweaty Betty (you've probably also heard of Hush Puppies and Keds).

The stock has crashed from $43 per share in May 2021 to close yesterday at $13.84 per share, close to a 13-year low. My bargain-hunting, value-investor, loves-to-buy-when-there's-blood-in-the-streets heart was beating rapidly as I listened to management tell its story...

How did inventory get so out of control in the first place?

As I explained, it was a major management misstep:

I looked at the management team and immediately saw that Wolverine got a new CEO at the beginning of 2022, Brendan Hoffman. And when I looked at his background on LinkedIn, I saw some warning flags: His prior job was CEO of apparel retailer Vince (VNCE) from October 2015 until September 2020, a period in which the stock went from $40 per share to $5 per share. And prior to that, he was CEO of Bon Ton Stores from February 2012 to September 2014. I can't see what the stock did then – because it went bankrupt in 2018!

This resume, combined with what happened to inventory in 2022, really makes me question whether Wolverine is a good bet for a turnaround.

That said, it might be a good candidate for a shorter-term trade, as selling down inventory will generate a lot of cash – and, assuming they are correct in having no write-downs, investors will likely respond favorably to this...

I nailed this one as well. As you can see in this chart, WWW shares initially soared by more than 40% but cratered in August as the company badly missed earnings and fired the CEO I warned about:

I'll be curious to hear what the new CEO has to say when he presents at the ICR conference on Monday morning. Inventory has come down sharply over the past four quarters from a peak of $881 million to $564 million, which boosted free cash flow, so that's a positive sign...

4) So did I see any companies I liked enough to recommend?

Yes – one was Boot Barn (BOOT), which is the largest western and work-wear retailer in the U.S.

I share a lot of my favorite ideas here in my free investing e-mail, but I save my best ones for my paying subscribers (to learn how to become one here at Stansberry Research, click here).

In my February 2023 recommendation of Boot Barn for my former Empire Investment Report newsletter, I showed the company's long history of steady growth and concluded by highlighting the comparison CEO Jim Conroy made between BOOT and high-growth, sexy retailer Five Below (FIVE). Here's an excerpt from that issue:

Conroy pointed out at the ICR conference that discount retailer Five Below is expected to earn $5.65 in [earnings per share] in 2023 – a bit less than BOOT – but its stock is around $200 per share! So why, he asked, is Boot Barn's stock valued so much lower?

The answer, Conroy hypothesized, is that investors and analysts – who are mostly based in places like New York and Boston, where Boot Barn doesn't have any stores – "don't see our customers every day, so it's not familiar to them." He concluded by encouraging those in the audience to "go visit our stores and talk to our store associates and customers."

That's excellent advice...

No doubt some of Five Below's valuation premium is due to the belief that the company is likely to grow at a higher rate going forward than Boot Barn, but it's not at all clear that this will be the case, as both businesses have grown revenue at an identical compounded rate of roughly 20% over the past five years.

Here's what BOOT and FIVE shares have done since I saw the companies at the conference:

Interestingly, in the late summer and fall, the stocks diverged, with BOOT rising more than 40%, while FIVE fell more than 20%, but since then they've converged.

I look forward to hearing what Conroy has to say when he presents at the conference on Monday afternoon, but I'm inclined to think that the stock is still a solid buy.

5) I enjoyed meeting three dozen friends and readers yesterday at the first day of the Ukrainian art show/auction, fundraiser, and cocktail reception I organized!

I look forward to meeting more folks this afternoon during the second day of the event, from 5:30 p.m. to 7:30 p.m. It's in the same conference room donated by the Kirkland & Ellis law firm – located at 601 Lexington Avenue, with the entrance between 53rd Street and 54th Street. Here's what the room looks like:

You can bid on all 124 artworks online here.

If you would like to attend in person, it's free and open to all – just click here to RSVP. It's a large room and I'd like to pack it, so please share this invitation with anyone you think might be interested in attending.

The auction will end at 7:30 p.m. this evening. If you don't want to wait until then, you fall in love with a particular piece, or you simply want to make a fixed donation, I've established "Buy It Now" prices for many pieces.

I hope to see you there!

Best regards,

Whitney

P.S. I welcome your feedback – send me an e-mail by clicking here.