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.
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