Nick Foy, CFP®
Since 2002, Crocs (CROX) has sold over 300 million pairs of some of the ugliest shoes on the planet. Their strategy, it seems, is to embrace the ugliness, and design what many consider to be the most comfortable shoe they’ve ever worn, fashion sense be damned.
This approach has led to a bit of an online backlash over the years, as this (one of my personal favorites) Facebook group shows. The group has existed since long before Facebook became the web’s number one destination for middle aged women to sell essential oils and other various multi-level marketing products, and they do nothing to shield Crocs and Croc-wearers from their disdain.
But, a strange thing happened on the way to bankruptcy: Crocs turned it around. In fact, since May of 2017, Crocs is up over 200%, more than doubling Amazon’s (AMZN) performance over the same time period.
And, really who would’ve guessed that Crocs, possibly the most bitterly divisive shoe brand on the planet, would have outperformed Amazon, the king of retail (and so much else)?
Well, not really, but sorta.
You see, passive investors who own the entire capital market can comfortably say that they own Crocs, and Amazon, and all the winners. Unfortunately, they can also say that they own Sears, and all the other companies whose performance has suffered and whose future prospects look so bleak. But then again, so did Crocs not that long ago.
Sure, CROX makes up just a tiny fraction of our client portfolios, but it’s good to know that we knew there would be an unexpected great performer somewhere in that haystack, and we bought the whole stack. By doing so, we ensured we wouldn’t miss out on the top performing stocks in any market.
In truth, we had no clue that Crocs would’ve done so well over the recent past. In fact, we didn’t even care. We spend no time focusing on the prospects of any individual companies. The data shows us it’s time wasted. The market does a pretty good job of pricing in all available information. It’s only when new information is presented that stocks react.
Instead, we focus on controlling those things we can control: Cost. Taxes. Expected risk. Diversification. Those advisors who spend time trying to beat the market mostly fail at their job anyway.
What will Crocs do over the next year and a half? We don’t know, and we don’t care. We’ll continue to own it within our portfolios, as long as it remains publicly traded and in business. And, we’ll also own the next stock that quietly outperforms Amazon, whatever it may be.