When "Ugly" Sells: Here's what this shoe brand teaches investors about competitive advantage!

From the desk of Miles Everson:

Happy midweek!

I’m so thrilled to talk to you in today’s edition of  “The Independent Investor.”

Each Wednesday, I publish thought pieces in hopes of helping you make wise decisions in terms of finance and investing.

Right now, allow me to share with you a very interesting and insightful business case study.

Keep reading below to learn more!

When "Ugly" Sells: Here's what this shoe brand teaches investors about competitive advantage!

At first, this company was laughed at—mocked, dismissed, and written off as a passing fad, even.

Yet, what started as a product ridiculed for its appearance has since become a  global cultural statement , delivering a staggering 870% stock surge for investors who saw what others didn’t.

Woah! How is that even possible?

Professor Joel Litman , Chairman and CEO of  Valens Research  and Chief Investment Officer of  Altimetry Financial Research, recently spotlighted this remarkable transformation.

In fact, he used the  Crocs (CROX)  story as a powerful lesson in competitive advantage, brand reinvention, and investor insight.

Let’s dive deeper into that below…

From Ugly and Uncool to 870% Upside

Crocs began as a novelty shoemaker with a simple concept:  Waterproof, slip-resistant clogs that floated if dropped in water . The shoes were quirky, colorful, and practical for boating, but far from fashion-forward.

To boost appeal, the company also sold small rubber accessories—“Jibbitz”—that customers could snap into the holes of their clogs for personalization.

However, as Professor Litman highlighted, these add-ons weren’t enough to sustain long-term growth.

By the mid-2010s, Crocs’ novelty had worn off. The brand became symbolic of “uncool,” and its financial health reflected that reputation.

During the Great Recession, Crocs nearly collapsed. Margins that once hovered around 13% in 2011 dwindled to nearly zero by 2016.

Investors and consumers alike saw little future in the business.

… until a  bold bet  changed everything.

According to Professor Litman, this was where Crocs rewrote its narrative.

In 2017, the company stunned the fashion world by teaming up with luxury brand  Balenciaga  to release platform Crocs priced at an eye-popping USD 850.

At first, social media erupted in laughter.  X  (formerly known as  Twitter) was flooded with memes ridiculing the collaboration.

To most, the move seemed absurd.

… but  something unexpected  happened.

Instead of fading into obscurity, the ridicule fueled buzz. The limited-edition shoes sold out within hours of their presale!

What began as a polarizing collaboration suddenly became a  cultural phenomenon.

What’s more?

Crocs didn’t stop there!

Recognizing the momentum, the company further leaned into high-profile collaborations.

In 2018, Post Malone dropped his first Crocs partnership, which sold out in under two hours. His follow-up release was gone in less than ten minutes, crashing Crocs’ website.

That’s INSANE!

Justin Bieber followed with a 2020 collaboration tied to his  Drew House  brand.

Again, instant sellouts and skyrocketing resale prices proved Crocs had tapped into something far bigger than footwear!

By 2021, Crocs wasn’t just a brand; it was also a cultural event. Collaborations became a central pillar of its strategy, driving excitement, exclusivity, and overwhelming consumer demand.

That year alone, the company sold more than 103 million pairs of shoes, generating USD 2.3 billion in revenue.

The result of that?

Shares soared, climbing more than 870% from their 2016 lows!

Clearly, that was nothing short of AMAZING!

The Lesson for Investors

Professor Litman emphasized that Crocs’ resurgence wasn’t a fluke but a result of building a  competitive advantage.

What was once mocked as “ugly” and “uncool” evolved into a global trendsetter because Crocs identified a unique way to differentiate itself.

Through partnerships, cultural alignment, and smart brand positioning, the company transformed from a simple footwear seller into a POWERFUL merchandising force.

For investors, the takeaway is clear:  Businesses with a durable competitive advantage consistently outperform .

If an advantage is not easily identifiable, it may not exist at all.

Here are a few guidance for evaluating opportunities in any sector:

• Look for hidden advantages. Whether it’s brand strength, intellectual property, or unique partnerships, a true moat often lies beneath the surface of financial statements.
• Pay attention to reinvention. Companies that find ways to pivot or reinvent themselves often unlock explosive growth when others least expect it.
• Don’t ignore the “ugly ducklings.”  Stocks that appear unappealing or unfashionable can carry MASSIVE upside if management finds the right formula.
• Watch for cultural alignment. Crocs succeeded by embedding itself in pop culture. Businesses that integrate into broader consumer trends tend to create outsized shareholder value.

As Professor Litman underscores, investors should always ask:

Crocs’ journey from nearly bankrupt to billion-dollar powerhouse is more than a quirky business story; it’s also a reminder that the market consistently rewards competitive advantage, resilience, and bold strategy.

… and if you’re one of those who recognize such traits early, the upside can be  extraordinary  for you.

Hope you’ve found this week’s insights interesting and helpful.

Stay tuned for next Wednesday’s The Independent Investor!

For the past few years, consumer-driven spending has powered the American economy during the pandemic and after it ended.

Learn more about  why consumer credit is starting to show cracks where investors would least expect it  in next week’s article!