In June 2012, James Nelson, associate portfolio manager at Herndon Capital Management, started selling shares of Coach, Inc. (COH) to purchase Michael Kors Holdings Limited (KORS) stock.
“At that time, Kors, which had opened up its first flagship store in New York City in 2000, was starting to use the money that they had gotten from their IPO to aggressively expand its presence and gain critical mass,” Nelson said. “Kors at that time was about a quarter of the size of Coach, but was very attractive.”
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Nelson said Kors stock in 2012 was more expensive than Coach stock from a forward p/e basis, but he said investors at that time were not giving the company credit for the potential opportunities ahead. Nelson decided to take a bet on Kors, and a year and a half later, he said it has paid off.
“Since that period of time, Kors have grown nearly 80% and Coach has been down about 10%,” Nelson said. “While our purchase and sell decisions are not perfect all the time, our dynamic and cohesive process consistently identifies opportunities when a change may be timely.”
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