Hugh, it's buy the rumor, sell the news. Everyone expected HOTT to post strong sales and guidance for the quarter and it was likely priced in. The next quarter is always a major losing quarter for them, so profit-taking off highs may continue.
This Forbes article says that 9% of the float is sold short: http://www.forbes.com/2009/01/09/macys-hott-retail-pf-ii-in_jh_0109options_inl.html?partner=yahootix
Hugh, I am a member of that 9% (Although I may play this one to the long side as well on the next dip, because it moves big for a low-priced stock.) If you are still holding your position, consider taking profits on half the position the next time it moves up, and hold the other half with a profitable stop in place if you're still bullish on the stock. Keep in mind HOTT has entered a historically losing quarter and the excitement of a stock hitting 52-week highs during a market downturn will wear off as we claw our way out of severe recession. The big money is moving into stocks that got killed last fall because they will charge full steam ahead during economic recovery.
When I went Xmas shopping, HOTT stores were next to empty. I saw more people in Crocs than HOTT. And no, I do not shop at those stores, just am a very astute investor that watches retailers. Nipple piercing is not a fad. Its a sickness.
Description: HOTT is a short after a recent run-up based on what will likely be short-term trends. Hot Topic is a mall based specialty retailer with two main concepts: Hot Topic and Torrid. With 683 stores, Hot Topic "offers music/pop culture-licensed and music/pop culture-influenced apparel, accessories, music and gift items for young men and women principally between the ages of 12 and 22." With 158 stores, Torrid "offers apparel, lingerie, shoes and accessories designed for various lifestyles for plus-size females principally between the ages of 15 and 29." Hot Topic's core business has been struggling for some time with negative comps. The last time comps were solidly positive was back in the early 2000's, when the concept was a lot less penetrated (274 stores in 2001 vs. 841 now). Since then, management feels like their core rock/metal music customer has become interested in a much broader range of music categories (and may not always want to dress like a rock musician). I think this is a huge problem for their business and a longer term trend that has been hard for them to break out of. More recently, the stock has been on a tear the past couple months, rising from $5.00 in early October to a recent price of $7.60 on better than expected comps and earnings. After posting flat to negative comps throughout the year, the company surprised the market in October with a 8.3% comp and raised guidance for Q3. Moreover, trends appear to be going well in November as well. These trends, however, have benefited from one-time type items (successful Halloween merchandise, the upcoming release of the Twilight movie) and do not represent fundamental improvement in the core business. With the stock at 18.7x '08 consensus eps and 16.2x '09 consensus eps, and comps like ANF, AEO, and URBN trading at 7.7x '09 eps, 6.8x '09 eps, and 10.8x '09 eps respectively, Hot Topic appears overvalued. Expectations about a turn-around are unrealistic and in time the stock should come back down, trading more in line with its peers. At 10x '08 eps plus $1.40/share in cash, the stock would trade at $5.40. :eek:
Brought my stop up to breakeven. HOTT acts like it wants to start following the herd. As a matter of fact, I almost sold it out at the market this morning. Maybe it will still buck the trend, if not I'll be out even.
Hugh, I hope you took some profits up there around 9.40! I covered my short @ 8.18 this morning because it looked very oversold and due for a second wind. Take what it gives you, because this quarter is not a strong one for HOTT.