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TK Looks OK to ME / Hot Topic MWHAHAHAHAHAHAHAH

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August 21, 2008 – Comments (4) | RELATED TICKERS: TK , HOTT

Two weeks ago I blogged about how I expected tanker stocks to rebound in the near future after getting beaten up lately:

"The stocks of tanker companies have been hit pretty hard over the past month or so, even shares of my favorite one Frontline (FRO).  Rightfully so, too given the massive 46% drop in oil-tanker rental rates that was reported last week.  Rates may soon begin to reclaim some of the ground that they lost though.  Bloomberg is reporting that tanker owners have instructed captains to slow down their ships.  The average speed of very large crude carriers (VLCCs as they are called in the industry) has reportedly dropped 3.8% to 10.21 knots since July 12.

This slowdown will theoretically reduce the supply of available ships and cause shipping prices to rebound.  The last time tanker owners pulled a move like this, in the last quarter of 2007, tanker rental rates posted their fastest two month rise in at least 16 years!

On this news, I have added two more tanker companies to my CAPS portfolio, in addition to FRO which I am already long.  They are Nordic American Tanker (NAT) and Knightsbridge Tankers (VLCCF)."

Today Credit Suisse came out with a bullish call on a Canadian tanker company so I though that I would post about it here in Global Gains.  The company is called Teekay Corporation (TK).  TK has gotten crushed lately, down 25% over the past month and it is sitting at a three-year low...and rightfully so.  Tanker spot rates have fallen off of a cliff and the company recently announced that it will restate its earnings from an announcement by the company that it will restate its 2003 - 2008 earnings.

Credit Suisse believes that the sell-off in TK has been overdone and I agree.  First of all, even though they have dropped considerably tanker rates are still sitting spproximately 75% higher than they were during the same period last year.  Not to mention the fact that they are showing signs of rebounding. 

Furthermore, while the restatement is somewhat troubling Teekay contends that its cash flow and liquidity as of Q2 '08 will not be impacted. 

Most importantly though, TK is cheeeeeap.  It is currently trading at TK is trading at 15% below the book value and 45% below the net asset value that Credit Suisse has calculated for it.  I plan on seeing if I can squeeze TK into my CAPS portfolio.

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At the beginning of June, I shorted the stock of teen clothing retailer Hot Topic (HOTT) in CAPS.  While doing so, I provided the following, insightful, well researched analysis:

"This store sucks. Have you ever been in one? I should have shorted it months ago."

Shakespeare it wasn't, but my call sure was right.  Its stock has fallen nearly 50% since then.  Admittedly it has been a long time since I have seen a Hot Topic store, but every time I do see one I confuse it with a Halloween costume shop.  While I probably can unfortunately no longer consider myself "young," I'm young enough and in tune enough with what is going on in the world to know that this store was a joke the last time that I checked it out.

Anyhow, HOTT reported another crappy quarter with a weak outlook today.  Why would anyone own stock in this pig?  The quote that I have been using in relation to domestic automakers for years is strangely appropriate here.  You can only improve your performance by cutting costs for so long...eventually you're going to have to sell a product that someone actually wants to buy.

Hot Topic shares dive on second-half outlook: Analysts say retailers' expense and inventory control can only go so far

Deej
No position in TK or HOTT (though I definitely should have shorted the latter for real.  Darn)

4 Comments – Post Your Own

#1) On August 21, 2008 at 3:39 PM, DemonDoug (86.32) wrote:

I've been tracking HOTT for years, ever since I dated a girl who told me she worked there and told me about the business.  It used to be a pretty good store, that catered to a lot of different teen niches, but in recent years it has gone completely punk/goth; what upper management failed to realize is that if they had kept selling UFO's and attire catering to the electronic dance music community, they may still be doing gangbuster business.  I used to be able to find some cool foamy the squirrel t-shirts in there too - now they don't even have that.

HOTT as i understand does it's best business in it's plus-sized stores which I can't remember the name right now... wait a minute, I see you put it right there, "Torrid."  If it weren't for that division they'd probably be BK, and I would not be surprised to see HOTT go BK at some point.

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#2) On August 21, 2008 at 3:39 PM, DemonDoug (86.32) wrote:

I've been tracking HOTT for years, ever since I dated a girl who told me she worked there and told me about the business.  It used to be a pretty good store, that catered to a lot of different teen niches, but in recent years it has gone completely punk/goth; what upper management failed to realize is that if they had kept selling UFO's and attire catering to the electronic dance music community, they may still be doing gangbuster business.  I used to be able to find some cool foamy the squirrel t-shirts in there too - now they don't even have that.

HOTT as i understand does it's best business in it's plus-sized stores which I can't remember the name right now... wait a minute, I see you put it right there, "Torrid."  If it weren't for that division they'd probably be BK, and I would not be surprised to see HOTT go BK at some point.

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#3) On August 21, 2008 at 3:50 PM, dexion10 (27.61) wrote:

Deej - I think TK is a winner as well. I know many hedge fund and mutual fund managers who like that stock and think it is a VALUE here.

TK is a very complicated biz model and some of the biz units are set to suffer soon - but overall the biz has been good at reducing it's spot market exposure.

TK is basically an MLP of shipping assets now - they collect a fat fee from their spun off divisions and they don't have to do much heavy lifting.

 

While accounting scandals usually cause me to run for the hills... TK inheritted this issue from their acquired company - this apple is not rotten to the core... best of all mutual funds sell on accounting scandals as a rule ... so you can buy it cheap here. 

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#4) On August 21, 2008 at 8:02 PM, dexion10 (27.61) wrote:

fyi I rec'd your link bro. again I think it's good to see someone finally giving TK some credit.

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