We're doing a jail break...

In tonight's Sell Block, we're springing Coach Inc. (COH)... a stock that I wrongfully imprisoned... a stock where I whiffed... I blew this one big time...

I stayed too negative on COH...

So, tonight, I'm going to explain how I screwed up... to show you what I did wrong. I don't want you to repeat my mistakes, somewhere down the line...

What did I do wrong?...

For starters, I let the media coverage... the media was talking about a disappointing quarter... talking about how COH was stuck with too much inventory... I let them control it... that was the rap from the media, and I gave it too much credence, when the reality was quite different...

In truth, the inventory in question that was supposed to be building, didn't even exist... it was just book accounting... it had to do with the yen appreciating as opposed to the dollar, since COH does a lot of business in Japan... It made it look like the same inventory was actually larger and more swelled... because it was worth more, due to the higher yen... Most people didn't even understand it... It looked like the inventory had gone up big but, if I had done the homework myself, rather than just listening to the headlines of the media, then I would have known that the inventory had basically stayed the same and it was a non-issue...

More importantly, though, I made the huge and unforgivable mistake of not trusting Lew Frankfort, COH's fabulous CEO...

I didn't like the fact that he was pursuing more business in America, and not overseas... Clearly, Lew knew his business better than I did... and it looks like he was a good bet...

To understand how wrong it was for me to distrust Lew, all we've got to do is go back a year, when I put together a list of retail CEOs who deserve the benefit of the doubt... I used Lew Frankfort as the paradigmatic example of a CEO, who's earned the benefit of the doubt, because he came on the show, after his company had missed the numbers, and said it was a one-time thing... He said he would deliver and, if you listened to him, you caught a double in the stock... So I knew Lew deserved the benefit of the doubt... but I believed the press over Lew... I didn't give him any due...

If you read the conference call... the stock was under $30 at the time... it was like no one believed the guy at all, and I was part of that miserable, stupid chorus... I saw that COH was innovating with lots of new products, but I figured it didn't matter, because they had the big inventories... foolishly failing to realize that the inventories weren't high at all...

I was just so blind, buying into the "Coach is dead" thesis, "high-end is dead" thesis... that I falsely imprisoned Lew and his great company...

I'm pants-ing myself, and I'm wearing the COH post-it... That's a daily double...

Now that we've sprung COH from the Sell Block, and explained my whiff, let's talk about why you might want to own this stock right now, okay...

COH is still growing its sales, even with all the sound and fury of the recession... the demise of the American economy... COH is able to grow its sales beautifully!... And earnings per share... 19% clip in the most recent quarter, even in this crummy environment... 15x earnings for Lew!...

COH's fiscal year ends in June... a long-term growth rate of 18.3%... criminally cheap! Like you're stealing a Coach purse...

Lew has been aggressively buying back his stock, okay... In the latest quarter, COH repurchased $327 million worth of shares, at an average price of $28 bucks... When this company buys back stock, you can see its good value... COH spent half of its repurchase authorization, just in the last quarter... I think this is Lew demonstrating how bullish he is on his own stock, in the best way possible... in the open market with cold hard cash!...

Since COH has bought back so many shares - the company only has $333 million left in its buyback, which was just authorized in early November - I smell another buyback coming soon.

COH is increasing its distribution in North America and Japan... It's also raising brand awareness in emerging markets, like China... Those newly-minted capitalists would surely fall all over themselves to buy a Coach accessory, to show off their wealth, as conspicuous consumption is the beating heart of capitalism... and nobody does capitalism better than the communist Chinese!...

Who knows? Maybe they'll stop counterfeiting Coach bags - a favorite ChiComm pastime - and just buy the real ones..

Lew has said that he expects COH's business in China to grow - and I quote him, "extremely rapidly..." saying that it has the potential to become a third leg for COH... that, after Japan and North America...

I'm telling you, I like this story... and I don't like retail, all right... I don't like retail...

The Street's expectation for this one is still very low...

You've got the $600-Coach-handbag-on-every-arm stimulus rebate coming out very soon... You've got the great buyback, you've got the Chinese growth... Hey listen, if this one pulls back - because, again, I don't like retail - COH is good...