Buy: Billabong Shares. Now!

Hit bottom, maybe! Room for growth! Grow rich!

Who doesn’t want to be just a little rich? Who doesn’t want to worry about money ever again? No more rent. No more car  payments. No more stressing when the electricity bill is jammed into your mailbox and you open it and it’s $500 and all you’ve got is a few shekels in your account.

Not you? Oh, you lie! 

Anyway, we like cash as much you do (at least deep in your heart) and, right now, at sixty Australian cents per share iconic surf brand Billabong is looking like one helluva buy. Yeah, don’t shake your head. This isn’t an emotional thing.

Let’s do the numbers and you’ll see.

First, Billabong has been through the ringer. The tough days, the hard decisions have been made.

A few years ago, four hundred or so retail stores and some crappy acquisitions they paid through the nose for were eating ’em alive. There was nothing intrinsically wrong with the gear (although it is a taste thing, this I accept) and it was selling well.

There was even a time only two years ago when the company’s debt had swollen so much it was fifty-fifty whether or not the administrators were going to be called in.

When Billabong listed as a public company in 2000 the shares sold for a little over two bucks. Fast forward a few years and they were $16 and climbing. Analysts were calling it the new Nike and predicting numbers in the high twenties. If you’d bought, say, 50,000 shares when it listed (a $100k wedge), you were now worth close to a mill.

So why buy ’em now at sixty cents?

Billabong have halved the number of retail stores and sold off a few of their biz’s, reducing debt, but, tellingly, a couple of hard-nosed US private-equity companies have bought hard into Billabong.

And the CEO is Neil Fiske, who was instrumental in driving the fortunes of the king of US retail Les Wexner, turning Victoria’s Secret and A & F into the dirtiest of money spinners.

On the creative side, Billabong has hired Roxy’s head designer to help drive Billabong gals, RVCA is starting to soar and Tiger Lily is still an unfulfilled buy.

Most interestingly, Billabong’s founder Gordon Merchant recently dropped $2 million upping his share parcel from 8 to 10 per cent. It’s a move that hints that he is finding the price too good to refuse.

As soon as the market works out the new management with their PE Backers have a plan to restore their old margins and and with Billabong still turning over one billion a year hit makes a share price of little over a dollar likely.

Is it worth a punt? Yeah, if you’re going to stick around for a few years. It’ll jump around, as shares do, but don’t torture yourself by watching the share price on your phone every few hours. Take a long-term view.

Set, forget, and come back when it’s around a buck. Then sell.

Note/warning: I ain’t rich so don’t’ wah…wah… and start pointing fingers if the sharp price goes south. My advice is pretty high end… but yeah… ain’t no guarantees.