Re: Have a long horizon or sleep at night?
Nords, can you favor us with your investment thesis to short BBW?
Uh, sure: I have a kid.
I hope you weren't expecting an Asensio-style in-depth research project, complete with fraud warnings and links to organized crime. Or a Buffett-Munger DCF with heartland homilies. This "analysis" (worth what you paid for it) barely even reaches Peter Lynch's level. But I am counting on the retailing boom/bust cycle repeating itself, especially in the face of trying to manage aggressive expansion.
I see these guys as the next Krispy Kreme-- great publicity campaign, commercials that make everyone go "Aaawwww", wonderfully sweet artery-clogging product, huge expansion-- yet something that inevitably saturates your tastes and isn't fun after the first couple attempts.
I've watched the cycle several times-- we profited mightily from 4Kids Entertainment when they started distributing Poke'mon videos/movies, and then we shorted them right back down when it faded. (I was forced to watch the first Pokemon movie in a theater. Afterwards I would have paid extra to short the stock.) Same cycle-- ironically on the same company-- with Yu-Gi-Oh! products. You could almost predict when the big institutional timers investors would finally look at their credit-card statements and notice what their kids were buying.
BBW is today's version of the wave of "build your own ceramics" franchises that swept the country a few years ago. Although our kid is now 12 and way too cool to be caught dead in a BBW, we've checked with the neighborhood's younger analysts. Most of them have been invited to an affair involving this product, and have perhaps gone back on their own for one more, but where's the rest of the repeat business? How many bears can one kid persuade their parents to buy for them? This isn't Discovery Zone or Chuck E. Cheese or McDonald's. I'm sure Warren Buffett would have a handle on the American population of eight-year-old girls along with an estimate of their annual bear purchases.
I give this a year or until the death-phrase "declining same-store sales". Kids will move on to the next cool thing, same-store sales will start dropping, and marketing costs will start rising. One analyst will edge nervously to the exit and then the crowd will stampede.
$29.57 last Nov and I'm considering going back for more this month or next. All those lockups are expiring in a couple more months. I haven't done my quarterly research yet but I admit that I was relieved to see their first correction last month.
Disclaimer-- I've only been shorting for a couple years and I do it in a personal account, not the retirement portfolio's brokerage account. Due to my penchant for being early at calling the bottom/top, I have a high tolerance for volatility. Although I've made money from 4Kids, Janus, Pfizer, and the NASDAQ, I also shorted KMart at $77 and paid dearly for it.
[rant]But I'll never challenge Eddie Lampert ever again on the basis of fundamental analysis and declining same-store sales-- he manipulates buzz better than I can remain solvent. In fact if I learn that he's buying BBW shares then I'll immediately cover.[/rant]
As UncleMick has mentioned before, I suspect that this testosterone-poisoned putzing will burn out in another year or two and I'll put it all in a small-cap value ETF. Or, if I finally spend the time to develop a system that doesn't interfere with surfing, it may take me even longer to get over it...
