It’s been awhile since my last post and I am back again with an interesting stock.
For those who are following apparel stocks, we are all familiar with stocks like Nike ($NKE), Under Armour ($UAA) and others. Not too many people know about this company called Children’s Place ($PLCE).
Let me first share something that will shock you. Despite it’s market cap of $181 million, they do around $480 million in revenue and make about 7-8% in net income. It’s a profitable business that stays relevant.
Many years ago when it was about $150, I made a bear-case and had a short position. My reasons? People not wanting kids, Target and Walmart selling lots of kids’ clothes. The list goes on. Oh, when I visited about 7-10 stores during that time, so many things were marked down that I didn’t think it was going to make it. And luckily for me, the stock tanked down to $14 and I made a ton.
So why am I interested in this now especially when they reported that they are running out of money? Here are my reasons.
- They also have 12.48 million shares outstanding
- 17.92% of float shorted
Any activist coming in and scooping up shares (doesn’t have to be that much since the stock price is low and they only have 12.48 million shares outstanding), this is going to see a short squeeze. Also, the current problem is a misstep from execution and shortsighted strategy. This can be fixed relatively quickly. And just like it had bounced back from $14 to $100 in 18 months, I believe this has the potential.
Am I going to make a big bet on this and use my life-savings? Of course not. Is it worth looking into and buy some call options? Absolutely. That’s exactly what I did. Not suggesting that you should do the same but as always, we are just bringing some fresh ideas on where to invest/trade and it’s up to you to do your own DD before making any investment decisions.
As I am writing this, $PLCE is up 17% and my call option just went up 67%.