Form fitting

Doubters to the right of me,

Doubters to the left...

Hmm, I might have some trouble making those opening lines into a memorable cheer. Nonetheless, despite the rampant doubt and disbelief that surrounds me and the investing opportunity this company manifests (oft recommended; most recently in the Entelechy post), Under Armour/UARM requires no cheerleading; it is doing just dandy on its own.

"Under Armour/UARM, formerly KP Sports, is engaged in the design, development, marketing and distribution of branded performance products for men, women and youth. The Company designs and sells an offering of apparel and accessories that utilize a variety of synthetic microfiber fabrications. Its active wear and sports apparel accessories are designed to wick perspiration away from the skin, help regulate body temperature and improve performance regardless of weather condition. The Company's three primary gearlines are marketed for consumers to choose HeatGear when it is hot, ColdGear when it is cold and AllSeasonGear between the extremes. For the nine months ended 30 September 2006, Under Armour's revenues increased 52% to $295.4M. Net income applicable to Common totaled $27.1M, up from $10.9M. Revenues reflect an increase in sales from the Mens, Womens, Accessories & Youth products, and an increase in Licensing revenues. Net income also reflects the presence of interest income vs. expense."

I like this quote from a recent IBD article on the company:

"Its credibility with athletes sets Under Armour from at least one rival," Horan says. "If you think about it, the kids in the band wear Nike and the jocks wear Under Armour."

True, very true; its athletic apparel hugs the body. While I lack the physique ("Hey, I'm working on it!") to clamber into Under Armour's truly athletic apparel, that reality does not lessen my appreciation for its quality. Of course, the company creates and sells plenty of technical gear for the rest of us, me included.

The shares, as you would imagine, reflect the company's resounding string of successes...

[click on chart to enlarge]

Since its IPO, the shares have enjoyed a nice climb. Oh sure, there was an ~8 month intermediate term base (area 1), but please note that each major low in that base was higher than the one prior, as too were the highs! The shares then broke out from that intermediate term base in early-October, ran higher, and then formed a short term base (area #2). Note the low of the short term base merely nudges the high trade of the intermediate term base. Very bullish price action, as it shows signs of unstinting demand! The shares broke out this week above this base as well, with explosive volume and a breakaway gap (area 3). Barring mishaps in the general market, the shares should now proceed higher in a new up trend, accelerated in pace from the one extant (that is, the one since its IPO).

Even though the shares now trade at all time highs, there is minor price resistance at ~$51.50 (the reason the shares turned down yesterday from this level), and then again at ~$55 (and rising). This pattern and setup counts to the low-$80s, once through the levels of minor resistance. I have long held an intermediate term target of $100/share, due one part to the company's increasingly positive fundamentals, a second part to the building pattern now being realized, and a third and equal part to the recognition that Under Armour/UARM fits exceedingly well the mold of a buyout candidate; Nike/NKE is the company most often mooted. Form fitting, indeed!

Does this opportunity yet strike your fancy? Measured against the risk of a possible albeit unlikely decline to the low 40s (~$10 of risk), a further rise of $30-50/share seems especially grand. Yes, reward:risk ratios of 3:1 or better 5:1 fit well my mold of an excellent investment.

What say you (now)?
-- David M Gordon/ The Deipnosophist