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Cherokee in the Bargain Bin

Cherokee (CHKE) has a Pre-Tax Earnings Yield of 9%, a Pre-Tax Return on Capital of over 100%, and a Market Cap of $325 million. It licenses clothing brands to retailers such as Target (TGT) and has high gross margins. 

It dropped significantly from $48 to just over $36 last month and is now at $36.54 per share. It pays an annualized dividend of $3, or 8.2%, at the current price. The recent drop is due to a decline in profits and loss of 2 licensing agreements for Mossimo and Carrefour, giving us a buying opportunity until these revenues are replaced.
Director Jess M. Ravich recently bought 15,000 shares at $37.93, more than doubling his stake in CHKE.

This looks like a classic Magic Formula stock, a great company that is temporarily out of favor.
Published Sunday, July 01, 2007 3:08 PM by Quasimodo
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Kaakoo said:

Who are the primary shareholders of CHKE? Are any mutual funds strengthening their stake in the stock at this downturn?
July 3, 2007 11:38 PM
 

Quasimodo said:

These Magic Formula picks are often going to be contrarian, focusing solely on good companies at good valuations. The Magic Formula will recommend buys on stocks that others are currently selling, like CHKE. The stock has dropped significantly recently, and the Yahoo message boards offer some explanations of which institutions might be dumping their shares, but who knows how accurate any of that is? Institutions don't officially report their transactions immediately afterwards. There are definitely some short-term concerns about the company, with the loss of the Mossimo revenues and the postponement of the annual meeting.
July 4, 2007 10:06 AM
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