YETI

YETI

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-$59.11 -67.34%
Ben's avatar
$17.7m follower assets
Aug Update
Pretty slow Aug. didn’t add much new cash.
Had that month where everything in your house breaks. Lightning strike, AC repairs, rock through the window.

Sells:none

Plan for the end of year. If markets keep giving me sales I’ll keep adding to the above names. Also plan on initiating a new position in $TREX at some point.
If markets go up, I’ll slow buying and build a cash pile for the next market down turn. Currently less than 1% cash.
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4 Growth Stocks I'll Be Adding To
I touched base on four of my favorite publicly-traded growth companies out there right now in my most recent Motley Fool article.

Two are more hypergrowth style, and two are steady-Eddie types with fair prices -- all are down around 40% to 65% YTD.


A one-sentence takeaway for each:

  • $SOFI - Building the rails for fintechs (neobanks) to operate on while building a broader consumer-facing (banking) flywheel.
  • $TREX - Feel-good, sustainable decking products, matched with a great valuation (PE of 21) and a history of stomping the market.
  • $YETI - Unaided brand awareness continues rising, cult-like following persists amongst its fans, and a PE of only 17.
  • $GLBE - Landed $DIS as a partner to help expand their global DTC sales -- an incredibly positive sign for Global-e's future and hopefully a harbinger of things to come.
Which company posts the best returns through 2032?
28%SoFi
9%Trex
23%Yeti
38%Global-e Online
21 VotesPoll ended on: 09/02/22
Tough choices. Big fan of $YETI as a company. Lean employee numbers give it top notch margins. Excellent management gives it >50% ROE and so far solid capital management, paying down debt when it’s stock is overpriced and bought back shares decisively once it dipped over 50%, completing total buy back program in 1 quarter.
$TREX will likely be the next new add for me. Been wanting to buy for 3+ years but just couldn’t when it’s PE was 40-60. But with a PE of 21 and a big revenue guidance downward. I think in the next 6 months will be a great time to be a long term share holder.
Global -E has been on my watch list since IPO. Love financial middlemen. Still watching. Do you worry about there recent 10x increase in SGA to maintain its revenue growth. SGA 9, 11, 19 million for 2018, 19, 20 (about 10% of revenue). This jumped to 126 million in 2021, 51% of revenue.
Banks are too depend on the fed for their cost of capital. I’ll likely never own a bank.
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$WMT earnings highlights
Looking at both Walmart and Sam's Club merchandise highlights, I gain a better gauge on which retail niches are doing well and which aren't.

Here are Walmart's quarterly merchandise highlights:

And here are Sam's Club's merchandise highlights:

From looking at the two brands, here are a few highlights we can gather:
  • grocery sales grew by low double digits
  • health and wellness products grew by single digits (people prefer to buy smaller containers of those products than in bulk)
  • technology, office and entertainment product sales continue to see declining sales
  • back to school spending has provided some growth for retailers in areas like merchandise and apparel

Overall, this earnings report makes me slightly bullish on $NKE $VFC $FL $DKS $JNJ $ABT while making me bearish on $WSM $BBY $ETD $RH $W $YETI $MLKN.

Being the bellwether of the retail sector, $WMT tells us what consumers are shopping for and what they aren't in the market for.
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When you say you are bearish/bullish on these adjacent companies, is that more of a short to medium term outlook?
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Ben's avatar
$17.7m follower assets
Yeti quarter review
$YETI q2 2022

This was a bad quarter by yeti standards. Despite solid top line growth of 17.4%, which is consistent with yeti historical average.

This was a miss as mgmt had guided for 18-20% growth and as a result of the miss, they guided down for full year estimates 15-17%.
The guide down in revenue growth didn’t concern me as much as the effect premium freight and increased commodity prices had on gross margin. Down 6.3% yoy to 52.1%. Yeti tried to bring offset gross margin contraction by decreasing SG&A 2.6%. But that wasn’t enough leading to a 4% yoy decline in operating income.

I also worry about a 100% yoy increase in inventories and them being unable to generate free cash flow this quarter with the gross margin headwinds.

I still believe management is above average at capital allocation. Paid down debt when PE ranged from 35-65 from 284 mil to 88 mil during 2018 to 2021.

In 2022 with high inflation only paid 6 mil debt. Instead bought back 100 mil$ at PE 20-25, dropping share count by 1.7%

Current EV-EBIT 15 and PE 20 is reasonable entry point and I’ll likely be adding in the coming months.

Long term, I still think yeti has a great future due to its strong brand (they literally invented premium ice chests), good management team, and best in class revenue per employee (which is a bananas $1.7 million per)

The strong brand gives yeti premier displays in prime locations at retailers.

I often get asked can a brand be a moat. In the outdoors world, I believe that answer is yes. When you are in the woods without a cell phone and miles from a city your gear has to work. Period. Whether it’s your clothing holding up to the elements (Patagonia, Sitka) or your climbing equipment not breaking (Tethrd) or your ice chest not getting broken into by a bear (Yeti).

As long as Yeti continues to sell quality products, their brand will have a moat. And Yeti still has room for improvement, as brand awareness is only 17% in the US.

The future growth will be driven by international expansion and new products.

International revenue up 35% yoy with 99% compounded 4 year growth rate since launch in 2018. Yeti still has many markets to enter as they are currently only in North America, Europe and Australia and international sales are only 10% of total revenue.
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Brett Schafer's avatar
$26.5m follower assets
Can brands in and of themselves have a moat?
This week for our Not So Deep Dive episode we covered $YETI, which has successfully found a niche in the premium cooler and reusable drinkware market. Its brand is clearly top notch among its target audience right now.

But here's the problem I have with a company like Yeti, which we see time and time again: the results don't seem predictable. When all you are going off of is brand value to consumers, that feels incredibly risky to me, given how choices and trends can change pretty easily over a five year timespan.

Personally, If I'm going to invest in a company because of its "brand" I want to buy it at a very cheap multiple.

Anyone have any thoughts of identifying durable vs. non-durable brands?

Nope; but this is similar to the reason I can’t bring myself to buy Crox. As dominate as their numbers look, it’s just too narrow a niche for me personally.
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Brett Schafer's avatar
$26.5m follower assets
Yeti International Revenue
Anyone cover $YETI closely? International revenue has soared in the last few years (99% CAGR)

we will be covering them on our next NSDD on Chit Chat Money

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I do. 35% yoy international growth. Now 11% of revenue. I was surprised during a recession, coolers (23%) had more growth than drink ware (12%). I would have bet the lip stick effect would have happened with drink ware. Buying a small mug as an easy gift similar to how some say you can buy a new lipstick instead of a larger purchase when money gets tight
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YETI Holdings, Inc. $YETI
1. Is the company undervalued?
EV/EBIT: 16.34
EV/Sales: 3.01
Price/Book: 9.64

$YETI has nearly 10X’d sales since 2014 and trades at a reasonable valuation. However these metrics are backwards looking and there’s reason to believe growth will decelerate moving
forward. Nonetheless $YETI is throwing off tons of free cashflow and should continue to grow for some time. The business is also incredibly profitable, which makes $YETI an interesting idea.

Link to full write-up here:

$YETI's ability to continue to offer new product lines has admittedly surprised me in the last several years. A fan of their flagship product, I wasn't ever inclined to be a shareholder but their cult-like following that seems to need to own everything they put on the market keeps the brand stronger than ever...I often compare Yeti to $LULU in that it's a great example of a product that is a great gift for others, but you don't often find yourself pulling the trigger on buying it yourself, lol. Maybe that's just me..
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Ben's avatar
$17.7m follower assets
My portfolio
I like how people post monthly or quarterly portfolio updates. I’m learning a lot about what people are actually putting their hard earned money into by reading these.

My current mindset is, this is a top 10 bear market all time, as long as your buying companies without near term bankruptcy risk and with a long enough time horizon, it’s easy to buy great stocks a low multiples right now. With that said now that I’ve mostly finished building my new positions in $YETI and $DOCU. This month I’m looking to add more to my existing positions. Mostly $GOOGL, $ASML, $MELI, $PYPL, and $WRBY. I also started a small position in $UPST and I’ll cont to add to that as well.
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Nice, most are solid names in my book (the once that are not solid is because I don’t know much about them 😅)
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Ben's avatar
$17.7m follower assets
Yeti
My approach.
Medical/science background. But I’ve always liked the idea of letting money make more money. Previously used a financial advisor to buy mutual funds for me but realized 5% charge initially and 1% per year to buy a worse performing ETF is the biggest scam since beanie babies. I picked up stock picking 3 years ago. Started out reading a few dozen books and now listen regularly to a few podcasts. Looking for ideas and critiques.
I start with margins and margin trends, ROE and ROI, debt and interest payments, cash flow and cap ex. If those look bad, that’s it. If they look good I keep going.
10k skim. Executive compensation, competition, net promoter score, LTV-CAC, net revenue retention, moat, share count trend and capital allocation. Are you spending 29 billion to acquire afterpay or did you just write some code to add BNPL to your existing app for free. Read about the industry and if I/analysis see growth. Check their website.
Then I’ll project out 5 years using historical margin trends and growth for good and bad scenarios. Multiply by historical PE ranges.
With that I give you why I’m buying $YETI
Gross margin improvement 46-56 (last 4 yrs)
Op margin improvement 10-18%
4 year compounded 22% revenue growth.
Paying down debt (339 mil), only 89 mil left. Now starting buybacks. 100 mil started and finished last quarter. Needs to announce another IMO. Capex to net income 25%. ROE 54. ROI 37%.
Competitive advantage
Brand is cool. Their displays are always top notch with prime placement. Best in class products which gives it a brand moat as long as they maintain quality.
Only 823 total employees. They make 252 k per employee in net income
Comparisons
Callaway golf has 24k employees total and makes 5k net per
Newelll (markers of Coleman ice chest) has 30k employees and makes 24k net per employee
Vista 60k net per employee
Expanding DTC sales as a percent of revenue.
43% female board. Use 100% recycled plastic.
Projections
Great scenario 61% gross margin, maintain the low end of SGA 34% to keep 22% revenue growth avg for 5 years.
Leaves us with 3.81 bil revenue. 990 mil op and 762 mil net. Market cap of 11.4 bil @15 PE and 26.6 bilat @35 PE
Bad scenario revenue slows. Unable to improve margins. 15% revenue growth per year for 5. Gross margin to 58. SGA has to increase to try to improve slowing sales to 39% of revenue.
2.84 bil revenue. 500 mil op. 408 mil net. Which is 6.1B @15 PE and 14.1 B at 35
Wide range of outcomes of course. But using the low end scenario and you a 50% gain to a 350% gain at 5 years. But a best case 7 bagger doesn’t seem out of reach.
None of that assumes more buybacks which I’d prefer they continue instead of M&A.
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