Thursday, May 19, 2005

HOTT or Not?

Well, my Hot Topic (HOTT) short position is underwater a little here. The earnings report was in-line yesterday, and during the conference call, an upward revision to the 2006 earnings guidance was announced. But, the numbers themselves did not look great to me... revenues were higher, which was offset by higher operating costs and a steep discounting of merchandise that was not moving. This caused earnings per share to remain flat Y/Y. Why the EPS was flat at all had to do with a corporate buyback of shares recently. Had it not been for the buyback, then EPS would have shown negative growth. Despite what I think, the market reacted positively to the earnings report and conference call. If HOTT moves higher, I will take a loss. I do not wish to risk more than 5% on this. The trade has shown me a minor loss of 3.5% at this point, a slight move higher and I will be covering.

In better news, RFMD is really skyrocketing. That puppy is up 20% in less than 2 weeks. And, someone pointed out to me that I missed two of my holdings when I disclosed my positions on May 13, 2005. These two holdings: search engine Ask Jeeves and touchpad maker Synaptics.

Ask Jeeves (ASKJ) I've spoken about before. I am going to hold on to the shares and allow them to convert over to IAC/Interactive Corp. shares. The Synaptics (SYNA) position was recently established after their latest earnings report that sent their shares tumbling into the 18 range. This is a much smaller position, but I think that there is definitely potential here for significant share price appreciation in the next 6-12 months. Many of the fears that Apple was going to drop them completely have now been quelled, and they are making headway in the cell phone market.

Altria Group (MO) closed at an all-time high today. It has touched a higher price, but only on an intraday basis. They've pretty much completed their acquisition of Sampoerna, a giant in the Indonesian cigarette market. Asia continues to provide the company with strong growth in tobacco sales. In Asia, there simply isn't the stigma regarding smoking that we have here in the U.S. Also, earlier in the week, the European cigarette maker, Altadis, announced a loss in market share partly due to Phillip Morris' success in their arena.

Let's hope that this rally continues. What a month it's been. So far in the month of May, the Nasdaq has posted a solid gain of just around 6.3%. I'll drink to that... if you are going to drink, try one of the tasty beverages supplied by Constellation Brands (STZ).

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