He gave up the reins of his company after admitting last year that he conspired with two corrupt brokerages to inflate share prices in initial public offerings. In April, he was sentenced to 41 months in prison.
In the past year, though, the stock has gained 69 percent. The company this week raised its annual profit forecast as sales rose.
The key to picking stocks of companies associated with well- known people is to ensure they are backed by a well-run business and have a viable strategy for growth, investors said.
"That’s when you have to distinguish between the name and the business," said Himali Kothari, an analyst at John Hancock Funds, which manages about $27 billion and holds Mossimo shares.
Liz Claiborne
Liz Claiborne Inc., for example, has been buying brands to expand its price range and diversify beyond women’s business clothing. Shares in the company have gained 28 percent in the past year and reached a record high in May. Founder Liz Claiborne left the board in 1990, having established it as the fastest-growing, most profitable U.S. apparel maker in the 1980’s.
Tommy Hilfiger underscores the risk of investing in hot brands, said Kothari. John Hancock sold the shares last year. The stock traded at $40.78 at its 1999 peak. It was unchanged at $7.55 today. The company now plans to close 37 of its 44 U.S. stores after Christmas to further trim expenses.
"Tommy came out of the high-entertainment, urban culture which worked well originally," said Wendy Liebmann, president of New York-based consulting firm WSL Strategic Retail. Over the years, "they seemed unable to evolve. Tommy Hilfiger seemed to be fixed in time."
"You need to have the breadth" of retail distribution, said Kothari, "as well as a strong brand name."
That’s why she’s betting on Mossimo, whose denim styles are winning market share from merchants such as Gap Inc.
With designer names, she said, "when it’s good it’s great, but when it’s not, you really get hurt."