Finance Professor Mailbag: Skechers

5. Could expand a bit on Skechers(SKX) with respect to your article about fad stocks and Skechers being an example of cash burn. Are your cash burn concerns more reflective of the recent cash burn (i.e., FYE08 to 1Q09), more long term or somewhere in between? I'm looking for a reason to separate Sketchers from the likes of Heelys(HLYS) and Crocs(CROX). --J.Z.

TFP: I think you have to look at cash burn over a longer period of time. Be careful to factor in the nonlinear effect of seasonal cash burn. I would be most concerned if a company had several quarters of increasing sequential cash burn. As to Skechers specifically, this company does have some elements of a fad stock, but it has developed multiple product lines within footwear and thus is not a one-trick pony like Crocs. Also, Skechers has begun to offer clothing lines such as T-shirts, hoodies, pants and hats. As such, it is moving closer to a Nike(NKE) (NKE) business model and away from a Crocs business model.

6. I have preferred shares of Lehman Brothers stock J series. They are now worth almost $0. Is there a possibility that if I wait for Lehman to come out of chapter 11, they could be worth something one day and pay a dividend again? --W.N.

TFP: I am sorry to say that the possibility of that happening is slim to none. At best, if this isn't a retirement account holding, you will get a capital loss to write off on your taxes.

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