QQQ3 Will Reach New Highs in Time

Some subscribers are worried that the Nasdaq 100 and its unleveraged tracker, QQQ, are hitting new all-time peaks while QQQ3, the leveraged and daily rebalanced version, is still short of the old peaks.

QQQ3 has no one-to-one relationship with the Nasdaq 100 because of the daily rebalancing. It is like a moon swinging around it in an unpredictable orbit. The direction of travel is the same and QQQ3 will move more. Since the trough in 2022/23, QQQ3 has roughly quadrupled. The Nasdaq 100 is up around 80pc. That massive outperformance is why we buy QQQ3. Who cares if they haven’t reached new highs yet; they will.

The ultra-long-term chart with one-year candlesticks above shows a golden cross buy signal by the moving averages I use. These are so rare that this is the only one on the chart. I am no longer so keen on buying QQQ3 because although it has built-in leverage it is not available for 5x leveraged spread bets and I cannot play my Kamikaze leaders and laggards games. Nevertheless, this is such an outstanding buy signal that I have bought some shares and will try to hold them long-term.

This ties in with my suggestion in recent alerts that the world is on the brink of a productivity revolution led by America and GenAI. If this happens expect QQQ3 to be a spectacular beneficiary.

The Staggering Benefits of Buying & Holding the Right Stocks

I just found this amazing quote. Way to go, Michael; a lesson to us all. A great strategy and brilliant at choosing exciting shares to buy.

Just buy it and hold it and don’t fret the short term volitility. Time is your friend. I’m 70 years old and opened my first brokerage account in 1975 with USAA when I was 21 years old. Most of what I bought up until the late 80’s were mutual funds. At the advent of the internet boom in the 90’s I began to trade individual stocks and used Scottrade. During the next 10 years my trading was hit or miss. When my parents passed a few years apart in early 2000 – 2004 I inherited $250k and began investing in stocks for the long term looking forward to retirement in my 60’s. I bought GOOG shortly after the IPO in 2004 at $90 a share, still have those shares with an initial investment of $5,000 for 59 shares bought in the 2004 IPO has now turned $321,503. My best investment even after dropping since this August has been AAPL; purchased roughly $10k in December 2004 now worth more than $5m. Others I’ve bought and held for 20 years are MSFT, CSCO, AVGO, NFLX, and others. If I had sold these the way most of you trade in and out on every dip I would never have had a chance at enjoying the wealth I have today. This post is long but the point is if you want the bulk of profit available to you then you need to forget where NVDA will be Monday, next month or next year and be willing to hold it a minimum of 5 years. I said minimum and it would be better if you would to hold 10 – 20 years. You’ll make more like that than any job will ever provide. Just buy NVDA and hold it 20 years.

Michael, 23 November 2023

Outstanding Q1 for Abercrombie & Fitch

Fran Horowitz, Chief Executive Officer, said, “Our outstanding first quarter results reflect the power of our brands and strong execution of our global playbook. We successfully navigated seasonal transitions with relevant assortments and compelling marketing, leveraging agile chase capabilities and inventory discipline, driving sales above our expectations. Growth was broad-based across regions and brands with Abercrombie brands registering 31pc growth and Hollister brands delivering growth of 12pc. Strong top-line growth, along with gross profit rate expansion, led to record first quarter operating income and an operating margin of 12.7pc.

With excellent first quarter performance, we are increasing our full year sales and operating margin outlook. We remain on track to achieve our 2024 goal of demonstrating sustainable, profitable growth after a defining year for the company in fiscal 2023. Our brands are delivering high-quality, on-trend assortments for new and retained customers across regions and brands. Importantly, we continue to make strategic investments across stores, digital and technology to further strengthen the company in pursuit of our long-term ambition.”

Abercrombie & Fitch, Q1 24 results, 29 May 2024

ANF is a management story. Fran Horowitz has been CEO since 2017 and has breathed new life into the business. In 2017 the shares traded between $10 and $25; the price recently topped $185.

The latest quarterly results were outstanding.

I’m happy to report that our sales trend remained strong throughout the first quarter, exceeding expectations we provided in early March. Net sales of $1bn and operating income of $130m were both the best first quarter results in the history of the company.

First quarter sales grew 22pc year-over-year with broad-based growth across regions, brands and direct channels. I’m also pleased to share that women’s and men’s divisions grew across our brand families in the quarter. We entered the year in a clean inventory position and maintained that discipline through Q1, allowing for fewer promotions which contributed to gross profit rate improvement.

With the strong top line and improved gross profit rate, we achieved a 12.7pc operating margin for the quarter while also funding strategic investments across marketing, digital and technology, and global expansion. These are simply outstanding results, adding yet another proof point of our global team’s ability to execute at the highest standard. Always looking forward, we are laser focused on showing continued growth through 2024, which is reflected in our increased full year net sales growth and operating margin outlook.

Fran Horowitz, CEO, Abercrombie & Fitch, Q1 2024, 29 May 2024

The progress is both global and in-store and digital.

For the quarter, total net sales of $1bn were up 22pc compared to last year with growth across regions and brands. This is the first time in the history of the company we have delivered sales of $1bn in the first quarter. On a reported basis, we saw a 120 basis point benefit from the calendar shift from the 53^rd week in 2023. Comparable sales growth for the quarter was 21pc. By channel, we saw double digit growth in both stores and digital.

On a regional basis, we delivered double digit growth in each region. Net sales grew 23pc in the Americas, 19pc in EMEA and 10pc in APAC. On a comp basis, sales grew 21pc in the Americas, 23pc in EMEA and 22pc in APAC.

In the Americas, we saw balanced growth across markets. In EMEA, the growth was driven by the U.K. and Germany, two markets where we are accelerating our increasingly localized marketing efforts. In APAC, growth was driven by China. In APAC, we saw a larger spread from comps to net sales growth which was primarily driven by foreign currency and a few store closures. From a brand perspective, Abercrombie brands delivered another stellar quarter of growth at 31pc while Hollister brands grew 12pc. On a comp basis, Abercrombie grew 29pc and Hollister grew 13pc.

Scott Lipesky, CFO, Abercrombie & Fitch, Q1 2024, 29 May 2024

The fundamentals are excellent pointing to the success of the new management approach since 2017 which has delivered dramatic results in the last two years triggering an explosive chart breakout. It’s just what I like to see and a pointer to further progress.

The company’s apparel market share is maybe one per cent in the US leaving a huge amount to go for. The approach is working. They need to roll it out worldwide and keep producing the magic in what is becoming a powerful virtuous circle of growth.

Dick’s Sporting Goods Creating the Future of Retail

Today, DICK’S Sporting Goods creates confidence and excitement by inspiring, supporting and personally equipping all athletes to achieve their dreams. Headquartered in Pittsburgh, the leading omnichannel retailer serves athletes and outdoor enthusiasts in more than 850 DICK’S Sporting Goods, Golf Galaxy, Public Lands, Moosejaw, Going Going Gone! and Warehouse Sale stores, online, and through the DICK’S mobile app. DICK’S also owns and operates DICK’S House of Sport and Golf Galaxy Performance Center, as well as GameChanger, a youth sports mobile platform for live streaming, scheduling, communications and scorekeeping.

Dick’s Sporting Goods website

As you can see from the chart the shares did not do a great deal between 2004 and 2020 but have been on fire since then. In January 2021 Lauren Hobart became CEO, only the third CEO at the company since 1948 and the first not to be a founding family member. You would never guess it to look at her but she is 55. She has had a considerable impact on the business which grew dramatically under founder Dick’s son, Ed, who remains executive chairman.

It’s quite a story.

The new House of Sport retail concept looks exciting.

It doesn’t stop there.

There is so much going on at this amazingly innovative retailer.

As well as a torrent of innovation Dick’s Sporting Goods looks after its shareholders.

DSG is valued at $18.7bn so a return of nearly $3.4bn in three years is incredible; that alone makes a compelling case for buying the shares.

Deckers Outdoor is already a QV favourite driven particularly by the success of its Hoka brand, which is taking the world by storm.

Deckers is on fire.

I am thrilled to be here sharing and celebrating Deckers’ incredible achievements in fiscal year 2024. For the full year, we delivered revenue growth of 18pc versus last year, nearly reaching $4.3bn of annual revenue; gross margin of 55.6pc, a 530-basis point increase over last year; operating margin of 21.6pc; and earnings per share of $29.16, representing a 51pc and nearly $10 increase over last year. These extraordinary results are a testament to the success of our long-term strategies and the execution of our hardworking employees. Over the past four years, Deckers’ revenue has grown at a compound annual growth rate of 19pc, adding over $2bn of incremental revenue. We also substantially expanded profitability, as earnings per share has grown at a CAGR of 32pc. With the scale of our organization’s growth, we are continuing to bolster our foundation through investments that support the long-term success of our leading brands. HOKA and UGG have become two of the strongest and most in-demand brands in the footwear space. They are continuing to win with consumers by infusing performance and fashion into products that embrace their respective brand codes. Building on the outstanding progress we have made over the last few years, our teams are laser focused on the significant opportunities that lie ahead, as we seek to build HOKA into a multibillion-dollar global player in the performance athletic space, grow UGG with premium products and elevated experiences that enhance consumer connections, expand DTC through engagement, acquisition and retention gains, and advance
our international markets through targeted investments.

Dave Powers, CEO, Deckers Outdoor, Q4 2024, 23 May 2024

Hoka! Hoka! Hoka!

The company is super excited about Hoka, which is already a $1.8bn sales brand.

HOKA has an amazing opportunity ahead as the brand continues to win with consumers around the world, and we look forward to facing this challenge head-on through our relentless focus on product innovation and authentic consumer engagement.

Regarding HOKA DTC, revenue growth was driven by global increases in acquired and retained consumers, which expanded 32pc and 44pc, respectively. We remain encouraged by the growth across markets, with the US continuing to deliver strong increases in alignment with the global averages and international regions increasing more than 50pc in both acquisition and retention. These consumer growth figures are leading indicators of HOKA brand adoption, highlighting the brand’s ability to both expand the scope of HOKA consumers and retain existing consumers through consistent product innovations that deliver an unmatched wearing experience.

Dave Powers, CEO, Deckers Outdoor, Q4 2024, 23 May 2024

UGG is also doing well.

Moving on to UGG, global revenue in fiscal year 2024 was $2.2bn, representing an increase of 16pc versus the prior year. For the year, UGG growth derived from the key initiatives set forth at the outset of FY2024, as aligned product marketing and commercial execution drove global increases in DTC acquisition and retention and expansion in international markets. These results are a testament of our powerful product engine and disciplined product management strategy. The UGG brand continues to maintain important relationships with valued wholesale partners while delivering strong results through the segmentation and differentiation of global marketplaces. With the allocation of core products driving high levels of full price sell-through and lean inventories in the marketplace, UGG has become a leading brand in wholesale while funneling upside demand to the DTC channel. For the year, this contributed to global gains in both DTC acquisition and retention, which increased 18pc and 17pc, respectively, contributing to the UGG brand’s 22pc increase in global DTC revenue. This is a truly impressive result for our DTC channel and reflects the work our brand, marketing and PR teams have been doing to maintain high levels of brand heat year-round, from seeding products with global and regional influencers, creating compelling product collaborations with prominent brands, and showing up on the runway at fashion weeks around the world, to deepening consumer connections.

Dave Powers, CEO, Deckers Outdoor, Q4 2024, 23 May 2024

As I near the end of my tenure leading the Deckers organization, I could not be prouder of how far we have come over the last eight years. Our company has transformed into a leading portfolio of consumer-favorite brands. We have experienced explosive growth by incredible and still-increasing brand heat across HOKA and UGG. Our organization has proven to be incredibly resilient and we have worked with agility to continuously deliver outstanding results.

Dave Powers, CEO, Deckers Outdoor, Q4 2024, 23 May 2024

I second that, well done Dave. In the last eight years Deckers shares have risen 25-fold.

Strategy

Luxury sneaker brand Golden Goose Group SpA is kicking off a Milan initial public offering that is poised to be Italy’s largest listing in over a year, buoying an uneven recovery in Europe’s equity capital markets.

Golden Goose aims to raise €100m ($108m) from selling new shares and its owner, the private equity firm Permira, plans to sell an unspecified amount of existing stock, the company said in a statement Thursday.

While the size of the offering has yet to be determined, at least 25pc of the company will be listed, and Bloomberg News reported earlier that Golden Goose could be valued at about €3bn including net debt. That indicates the IPO will be Italy’s largest since at least the €599m sale by gambling company Lottomatica SpA in May last year.

Bloomberg UK, 30 May 2024

Shabby Chic Golden Goose to List in Milan

Golden Goose makes shabby chic sneakers as illustrated above. They are not cheap at prices ranging up to $900.

Golden Goose is a luxury trainer brand known for its distressed models which sell for upwards of 500 euros. The shoes are emblazoned with a “Super-Star” logo and have been worn by celebrities including Reese Witherspoon, Selena Gomez and Taylor Swift.

Each pair is handmade and individually distressed in the northern city of Venice where the company was founded in 2000. The Carlyle Group acquired total ownership of the company in 2017 and focused on expanding its physical presence globally, growing retail operations from seven to nearly 100 stores in just a few years. In 2020 the group sold a majority stake to Permira, which is currently exploring an IPO for the brand.  

City Index, 7 February 2024

Business is strong.

The shoe brand had blowout 2023 earnings, reporting $637m in revenue, an over 17pc bump from 2022’s $543m. Having opened up 21 stores last year to total 191 brick-and-mortar locations, Golden Goose is eyeing an even more ambitious 2024, tapping former Gucci CEO Marco Bizzarri to join its board in April.

The brand, favored by celebrities like Taylor Swift, Reese Witherspoon, and Michael Phelps, is easily recognized by its yellowed, weathered soles and knotted laces, somewhat deceiving of its $740 price tag. It’s a tip of the hat to the designer jeans of years past, with substantial tears, distressed denim, and exorbitant price tags.

But Golden Goose, despite its star-studded following, has also struck a chord with Gen Z, whose obsession with shabby chic and quiet luxury has the generation clamoring for the shoe. About 80pc of Golden Goose’s consumer base is Gen Z or millennial, according to CEO Silvio Campara. 

“They come dirty, so I don’t care when I get them dirty,” influencer Syndey Schiffer said in a TikTok.

Golden Goose’s signature look may be synonymous with modern streetwear, but it’s drawn controversy for “glorifying poverty,” particularly after the brand launched a $585 sneaker with what appears to be a piece of duct tape strapped to its toe and heel. 

Don’t let the shoes’ battered look fool you: The company prizes its artisanship above all else. In 2022, Golden Goose’s flagship store in Milan expanded to offer in-house cobbling and repairs, a $100 add-on to the already pricey sneaker. It employs a cadre of twenty- and thirtysomething store employees to embellish products with rhinestones and patches.

“Artisans are able to produce uniqueness with their hands,” Campara told the New York Times. “And artisanship creates affection.”

Fortune, 28 May 2024

The shares are expected to list on a modest valuation but since I have not seen the prospectus there may be a reason for that. They look like an interesting punt in opening dealings. For reasons I don’t fully understand most of the customers are female. There seems to be ample scope to broaden the brand’s reach and the name is perfect.

This shabby chic thing is brilliant; how rich people love spending a fortune pretending to be poor but with huge logos so those in the know realise that the battered look is expensive. How about a distressed look for Rolls-Royce cars, Rolex watches, and wedding dresses – the potential is endless. The more rubbish it looks the more it costs.

I realise that with my barn in Saffron Walden, I need to refurbish the inside, obviously with distressed paint looks and battered furniture and leave the crumbling outside as it is – proof that I must be a zillionaire. Now I know why my reclaimed York Stone costs so much; I am right in there with the zeitgeist – all those different shapes and shades create magic.

Share Recommendations

Wisdomtree Nasdaq 100 3X. QQQ3. Buy @ $180 (most likely higher when Monday dealings begin)

Abercrombie & Fitch. ANF. Buy @ $172

Dick’s Sporting Goods DKS. Buy @ $227

Decker’s Outdoor. DECK. Buy @ $1093

Golden Goose Buy in opening dealings (some time in June)

Nvidia Quotes to Treasure

I found some amazing quotes on Yahoo Chat Forums.

In 1890, Standard Oil [which made John D. Rockerfeller the world’s richest man and arguably, in real terms, the richest man ever] controlled 88pc of the refined oil flows in the United States.

In 2023, Nvidia continued to dominate the market with an estimated 86pc market share.

JeffG, 24 March 2024

Just a reminder and because it is one of my favorite JENSEN [CEO and co-founder of Nvidia] statements, he recently said, “Even if our competitors gave away their chips for FREE, NVIDIA would still be a much better solution for our customers”. For someone that rarely uses hyperbole that is a truly amazing statement.

Brad111, 10 April 2024

Also, some general wisdom appeals to me.

I retired from Wall Street at 32. Have made a living buying stocks for the last 34 years. There are two rules I never break. First never try and catch a falling knife. If I am going to play that value strategy I always wait till it has traded up at least 10pc from it’s bottom.

The second lesson that was much more important I learned from Ken Hebner. He said “I’ve made a lot more money buying stocks that have just doubled than buying stocks that have fallen in half.”

Never sell a position making new highs.

deepharbour, 29 May 2024