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Varchild2008 (83.82)

Dump Hot Topic or Go Long?

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May 25, 2009 – Comments (4) | RELATED TICKERS: HOTT

So the dillmma is whether I dump the stock before it falls further towards $4, or do I stick with it knowing that eventually the shorts will get squeezed?

Reasons to DUMP  (HOTT):

1)  I didn't get my quick profit so why sit around taking further losses on this?

2)  I have a stock in my portfolio that is doing extremely well fundamentally and the share price is WAY undervaluing the company.... so Why not dump HOTT and throw the cash into that one?

3)  I can't stomache the volatility in the Retail Sector...given my horrid 2008 track record in that sector.

Reasons to keep (HOTT) for the Q4 earnings release:

1)  Merchandise for Transformers and Harry Potter along with Marlyn Manson's CD should bring back shoppers to the their stores once again.

2)  As the share price drops to $4.00 a share.. Isn't that a HUGE buying opportunity?  And given the SMALL...TINY....MINISCULE amount of shares I own in HOTT... I could easily double down on this one when it drops back to a $4 handle.

3) Twilight Sequal is coming and Hot Topic still has the rights to Twilight merchandise. 

I do not view this company like a "Wilson's Leather" that sells Leather Jackets and that's all....So, of course Wilson's Leather goes bust...  Lots of Tiny Leather Companys come and go through the years as that business is extremely tough with way too much competition.

Hot TOPIC is not without their own competition though.  They want to sell Music CDs and thus they are competing with gigantic corporations like Best Buy and FYE in that department.  So Green Day sells 200,000 copies of their Music CD....and HOT TOPIC is sitting their wondering why GREEN DAY's CD isn't getting sold.

It seems to me that Green Day's CD  (IS) getting sold... just not at Hot Topic.

POSSIBLE SOLUTIONS  if you find yourself in a similar DILEMMA:

Step 1)  DUMP your entire stake in the company confident in your analysis that the share price has room to fall.

Step 2) Quickly throw that cash into your "better stock" with "better value."

Step 3) If you have sickening regrets for abanonding HOTT (or whatever stock it is you dump), set aside some cash to buy back into that stock with the mental picture of going LONG on the catalysts. 

The end result is you have the stock you dumped for a better value share price and can look LONG TERM to some really good catalysts, while having increased your stake in another company that is already at an extremely good share price value.

So it is a WIN-WIN in the end.   Even if you decide NOT TO exercise Step 3, but to just completly forget your mistake with HOTT....You still come out ahead!

And the moral of the story is that it isn't a big deal to SELL your shares after making a mistake and selling them quickly as possible is preferred versus hemming and hawing for weeks of losses. 

4 Comments – Post Your Own

#1) On May 25, 2009 at 2:10 PM, OldEnglish (28.11) wrote:

Shorts are RARELY wrong. I mean real world shorts, not no-risk Caps players. Sometimes they get crushed in short squeezes but the majority of the time, Shorts are the smartest people in the room. e.g. Jim Chanos. Peace be upon him.

We're averaging 500,000 plus additions to the unemployment roster every month. Do you truly think those people will cave-in and buy a new Twighlight T-Shirt for their equally unemployed Emo son/daughter?

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#2) On May 25, 2009 at 5:04 PM, Mary953 (76.85) wrote:

OldEnglish - You would be surprised at what absolutely absurd things parents will try to get for their children long after they run out of notches to tighten on their own belts.  That noted, I totally agree with you on the specific example here. 

Varchild - Your solution seems so obvious.  So do you know why I am going to print it out in BIG BOLD CAPITAL LETTERS and post it above my computer?  Because I get so caught up at times that I need to be reminded

that it isn't a big deal to SELL your shares after making a mistake and selling them quickly as possible is preferred versus hemming and hawing for weeks of losses -    it  REALLY isn't a big deal to SELL your shares after making a mistake and selling them quickly as possible is preferred versus hemming and hawing for weeks of losses -    it HONESTLY isn't a big deal to SELL your shares after making a mistake and selling them quickly as possible is preferred versus hemming and hawing for weeks of losses. SO DO IT ALREADY!

and if I am lucky, I will remember your wisdom when I need it - which, in this market, is frequently.  Thanks, Varchild!

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#3) On May 25, 2009 at 10:08 PM, Varchild2008 (83.82) wrote:

"Shorts are RARELY wrong. I mean real world shorts, not no-risk Caps players. Sometimes they get crushed in short squeezes but the majority of the time, Shorts are the smartest people in the room. e.g. Jim Chanos. Peace be upon him."

Actually SHORTS are (RARELY RIGHT).

It depends entirely what your time frame is.  Were the SHORTS correct to short DPS down to an $11 handle?  You would think AT THAT TIME.... Certainly you wouldn't think that anymore as now the share price is nearly $22 a share.

Please.. Please...Please don't jump on some crazy bandwagon that a short position is somehow the "better position."

it really is just a short-term catalyst position.   It stands up to its name.  Works.. if you are SHORT TIME FRAME the stock.

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#4) On May 25, 2009 at 10:17 PM, TheCaulfieldMan (86.07) wrote:

dump

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