Under Armour has a new fan - in the firm founded by the 'Warren Buffett of Canada'

By Bill Peters

Under Armour shares rise after hours as Fairfax Financial continues to build up a large stake in the athleisure giant

Shares of Under Armour are down around 32% over the past year.

Shares of Under Armour Inc. got a boost after hours on Monday after Fairfax Financial Holdings continued to build up a large stake in the athleisure giant, whose stock has struggled over the past year.

A filing on Monday showed that as of Dec. 30, Fairfax owned a little under 42 million shares of Under Armour (UAA), representing a stake of around 22%. Over the past month, the Toronto-based firm has disclosed other investments in Under Armour. Fairfax was founded in 1985 by Prem Watsa, who has over the years has occasionally been called the "Warren Buffett of Canada."

Shares of Under Armour rose 3.5% after hours.

Fairfax's investment follows a 32% drop over the past 12 months for the athletic-gear maker, which in November said that it had agreed to part ways with NBA star Stephen Curry in an effort to focus more deeply on its turnaround efforts and its core products.

Under Armour has been dealing with steeper tariffs and competition. It has tried to slim down its product selection, while selling at higher prices and improving its marketing strategy, William Blair analyst Dylan Carden said in a note last year. However, he said he felt that those efforts were in their early days.

UBS analyst Jay Sole, in a note on Friday, said he viewed Under Armour as a "turnaround stock," with new product innovation and better sales growth likely up ahead. He also said survey data from his firm showed that the Under Armour name still carried a lot of weight with consumers.

"Survey results indicate Under Armour's brand name belongs in the same class of brands such as Lululemon, Jordan, Adidas, Puma, On, Hoka, Skechers and New Balance," he said.

"The average market cap for these brands which are publicly traded as standalone entities is $19B vs. just $2.1B for UAA," he said, using the ticker symbol for Under Armour. "We're not saying UAA is worth $19B, but rather the valuation differential between UAA and its competitors is far too wide in our view."

As of Monday, Under Armour's market cap stood at $2.2 billion.

-Bill Peters

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01-05-26 2020ET