Sunday, March 09, 2008

Notable Calls Network (NCN): Catching the bottom in Crocs (NASDAQ:CROX)

While probably not the most profitable but quite surely among the most elegant calls made on Notable Calls Network (NCN) last week was the Crocs (NASDAQ:CROX) one.

On Thursday March 6, around 12:38 PM a NCN member pinged me with the following heads up:

- My friend who has a huge CROX position and I am currently on the phone with as I write this just spoke to the CFO of CROX who says that Costco (NASDAQ:COST) will issue a statement today stating they misrepresented the facts about CROX on their call yesterday...if the market gets hammered then of course nothing will go up but I believe we will get a reaction when it's announced.

Well, since I've had CROX on my radar for quite some time, the information seemed interesting enough to do some further dd on it. I knew the stock was down close to 15% in two days, possibly on comments from COST. I was a bit hesitatant to immediately distribute the call to other NCN members as it was coming from a relatively new member that had yet to build the highly credible track record of many of the older members.

So, in order to get a sense of the validity of the call, I quickly did two things:

First, I went back and took a closer look at what the management at Costco had said regarding Crocs on their FQ2 conf call on March 5. It went something like this:

"... General merchandise, as I mentioned, is doing fine. Again, we should continue to benefit a little bit and I don’t think this is a big impact relative to the economy, but it’s certainly a tempering offset to it. I think the fact that we -- our non-food buyers are seeing more availability of what I will call branded non-food items where historically we couldn’t get our hands on and somebody just the other day mentioned huge availability in the apparel, things like name brand jeans and name brand women’s apparel and Crocs and the like. The impact -- and we are seeing some of that even on the furniture, the home furnishing side, getting those calls ..."

The comments hit wires around noon and likely contributed to CROX's free-fall over the next couple days.

Why were the comments considered a negative for CROX in the first place?

Costco isn't exactly famous for their shopping experience nor for the quality they offer. People go there because of the low prices. So, in CROX's case it seemed investors became worried that being added to Costco's merchandise mix would indicate problems with demand & destroy pricing. Note that inventory at CROX has been growing significantly over the past qtrs.

Secondly, I ran the call by some smart retail watchers. Must say most were pretty spektical noting it would be very difficult for an investor to get through to CROX's CFO.

Yet, I felt that with the stock down considerably, still huge 30% short interest and somewhat more reasonable valuation any positive news would pop the stock.

So, around 12:46 PM I distributed the call to all NCN members. It proved to be a good decision as the stock quickly bottomed bouncing 1/2 pts.

The thing that made the call really elegant was the fact that around 90 minutes later Crocs (NASDAQ:CROX) issued the following press release:

Crocs, Inc. Reiterates Retail Distribution Strategy

In the release the co reiterated that it had segmented its distribution strategy in order to maintain price integrity and enhance brand equity. The Company also reiterated that it did not, nor did it have plans to sell its Crocs branded merchandise to Costco Wholesale Corporation.

The press release caused the stock to spike another 1.3 pts, giving investors a nice 8-9% gain on the trade (depending on exit/entry).

This is definitely the kind of stuff that makes me proud to be running Notable Calls Network. Kudos goes to G for the heads up.

Hope you enjoyed it,


Want to be part of NCN?

It's easy. Just shoot me a brief email that includes a short description of yourself and your AOL nickname.

Please do note that contacts via IM are limited to people with:

- 3+ years of trading experience

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I will not accept contacts from purely technically oriented traders, penny stock fans or people who have less than 3 years of experience in the field.


sunfun said...


catching bottom and falling knife should be same...

Trust me... been there..

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