For the short-term, sell Under Armour (UA). These are my reasons why:

Sell Under Armour ASAP

For one, look at the way Under Armour’s share price has skyrocketed in September. Up 36%, that has to first entice some investors to sell. Adding to this, I expect Retail Numbers for fall to be worse than expected as unemployment continues to rise and excessive consumer spending continues to decline. Plus I am still wary that Under Armour’s brand is strong enough to beat out an economic recession. Especially one where the consumer is under so much pressure. Lets not get me wrong, I love Under Armours brand (I own their shoes, shorts, and shirts) and have great respect for the direction of the company. Unfortunately, I don’t believe enough people are sold on the product, which will cause difficulties when going up against Nike and Addidas. In a strong economy, Under Armor would be fine. Unfortunately, that’s not the case and the challenges of a weak consumer will send the stock lower. Its not that they don’t have a great product. It’s the fact that many consumers are shifting to lower quality, lower price brands. Plus don’t get fooled by the rising stock market. There still is a huge disparity between Main Street and Wall Street as I characterized in last week’s article. Most Americans are cutting back on discretionary spending and are planning on continuing this habit, which I see as a huge hit to the resurgence in the economy.

Earnings Scare Me

With the third quarter coming to an end much anticipation is on Under Armour earnings report. October 27th is the scheduled date to report and Under Armour’s management expect earnings to come in between $0.80 to $0.82 for this year. In this case, management has been very cautious with their long-term outlook. I think Investors should be scared off by this cautious behavior. With Under Armour trading around $30 that means that is a multiple of around 36 times forward earnings. Basing it on this alone it would be irresponsible to continue to hold onto this stock.

“Protect this House”

In my opinion, you should sell Under Armor this week at around $33-$33 a share. We are entering risky times especially among retailers so go by Under Armor’s slogan and “Protect this House.” Under Armour’s been a solid investment since I recommended it in June as its up around 45% yet every good investor needs to know when to pull the plug and the time is now.

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