Thoughts on Build a Bear?

[nightlyraver]

Anyone have any thoughts on Build a Bear (BBW)???

It has pulled back to its support level today, and I just doubled down on my investment (I like to buy in increments).

I think that this company is a winner since every time I go into one of their stores I am impressed at how full the store is, how great their selections is, and how they managed to get me - a somewhat cheap guy - to spend $50 on a damn teddy bear.

Some questions:

Why is this stock so heavily shorted?
Does this hurt or help me, assuming that they meet or perhaps beat their estimates?
Why are their margins so low? Surely the markup on the stuffed animal clothes is quite large.


IMHO, I have calculated that this stock will either go down by 5% at which point I will sell it, or go up 30% and perhaps even double.


Thoughts?

(Full disclosure, I own 200 shares of BBW. But seriously, I'm not just puffing this stock over a $5000 investment - I really want some feedback as I am somewhat new)

[AvivaSimplex]

Given BBW's EPS and growth, you'd expect the share price to be higher than it is. The reason it's not is that same-store-sales have been dropping.

Basically, they open a new store, and there's a flurry of activity where local families buy bears. Then sales drop--how many stuffed bears does one family need? Plus parents will remember how they managed to spend $50 on a stuffed bear.

This situation is not unfamiliar for retailers. A similar thing happened to Krispy Kreme donuts and Abercrombie and Fitch.

As with those companies, there will be a period where overall growth continues, where BBW opens more new stores every year, and feasts on the initial flurry. Eventually, though, they'll have stores in most areas, and nowhere else to expand. What's worse, the corporate management may decide they need to continue growth at any cost, opening stores in more and more marginal areas, where they quickly go from making to losing money.

BBW's management seems to see this risk, and they're trying to improve SS sales. They've got new stuffed animals like the penguin from Happy Feet and Shrek. My local science museum is putting in a Build-a-Dino, which will probably be enormously popular.

Really, the question is whether those strategies will work to keep families coming back for multiple visits. If so, the stock would probably triple in the next 5 years. If not, it either overexpands into a debt cycle, or it recognizes that there are a limited number of places where it can operate profitably, and growth slows dramatically.

I like BBW's concept. I don't have a good intuitive feel for whether their animal-diversification program will be successful.

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Why are their margins so low? Surely the markup on the stuffed animal clothes is quite large.

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Retail space in upscale malls isn't cheap.

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I have calculated that this stock will either go down by 5% at which point I will sell it, or go up 30% and perhaps even double.

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The rest of your post is good, but this doesn't make any sense. If you think the company is worth owning for $26 a share, why would you sell it for $25? The fluctuations in general market sentiment don't tell you whether BBW will be a successful company. If you can't afford to lose the money, you shouldn't be investing in individual stocks.

[meditate89]

You should really take a long term outlook... why would you sell this if it went down 5%???
Isn't it a better deal if it costs 5% less?
Think about holding stocks for 5-10-20 years. It's impossible to predict where a stock is going to go in the short run. (This isn't to say I wouldn't recommend selling if the stock doubled in a year!)

At first glance, their financials seem solid but I haven't done much research on this company. Their growth aspects seem solid. But as you said, you might want to do some further research and see why insiders are selling their shares, and also see whats up with the heavy shorting.

Also, I think Aviva did a good job of explaining why the company appears to be so cheap - keep an eye out on same store sales!

[csuf_gambl0o0r]

if you're a guy and you walk into one of these stores, you will get absolutely steamrolled by 15 year old girls. but i do like the concept though, build your own bear with everything customized on it, you can even record your voice on it.

[nightlyraver]

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I have calculated that this stock will either go down by 5% at which point I will sell it, or go up 30% and perhaps even double.

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The rest of your post is good, but this doesn't make any sense. If you think the company is worth owning for $26 a share, why would you sell it for $25?

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The reason why I say this is because it seems that in the past 6 months or so there has been support at around the $26 level (this is also the 200-day moving average). If it drops down to $25, it shows that this support has collapsed, and there is no telling how far down it could go. I would want to wait until it develops a new support level before diving in again.

Is this thinking wrong?

[AvivaSimplex]

I disagree with it, because I think technical analysis is hocus pocus. At best, it's a way of describing what has happened in the past, but I believe it has little to no predictive power. Others will disagree with me.

[Alfil]

I'm considering a trade around September. I looked at their historical chart and they tend to peak after the Christmas season than trend down during the 1st and 2nd QTRs. Additionally they are having lower highs from their previous peaks and lower lows during their off quarters. In conjuntion with a large drop off in EPS from last quarter and Q1 EPS estimates being slighly less than last years Q1 I would expect the downward trend to continue baring a better than expected quarter.

[Sniper]

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Think about holding stocks for 5-10-20 years. It's impossible to predict where a stock is going to go in the short run.

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This is not true... impossible is too strong a word... it may actually be easier to predict what will occur over a shorter time frame than what will occur over a longer time frame, where many more factors have to be considered.

I can bear witness to my own ability to put a floor under a stock or move it, based on my own actions in a stock. Some of those actions don't even include actually completing a trade.

ps... my daughter and niece absolutely love Build A Bear

[meditate89]

You're right... its not impossible to predict... just nearly impossible to predict correctly.

I realize there's a very very small percentage of people who do well timing the market, but I wouldn't feel comfortable advocating this strategy to anyone on this board. I can't predict the market in the short run, Buffet can't predict the market in the short run- but i realize there are some very unique people out there like you who can.

Unless you can show us your past short term trading results, AND provide some detailed instruction on how to go about doing it, I believe it is immoral to attempt to steer posters towards a trading technique that is clearly inferior for 99+% of the population to use. Many trades and short holding times lead to increased transaction fees, and a higher frequency of taxable events in the form of short term cap gains. Besides the fact that attempting to time the direction of the markets seems preposterous to me at best.

I haven't quite perfected the buy stock X and then sell it when it drops 5% technique yet... I hope the OP runs good with this strategy. If I buy a stock and then it drops in price, I tend to buy more, NOT sell!

95% of the rich people I know of have had long positions for 10+ years, allowing retained earnings to compound over a long period, while creating very few taxable events.

"In the short run, the market is a voting machine, but in the long run it is a weighing machine." - remember reading this somewhere? I assume by your post that you disagree with this author's sentiment?

p.s. Can you please tell me the price of BBW, or any other stock for that matter on 9/15/07? Let me know how certain you are about these predictions, whether it be 30%, 50%, 95%, or 100% certainty. Thank you very much in advance for this information. I expect to follow your advice to at least a 30-50% return annually. I'm going to use marketocracy for the first year, but after that I'll be ready to jump right in (assuming you deliver the goods the first year).

[Sniper]

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You're right... its not impossible to predict... just nearly impossible to predict correctly.

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Again, it depends on your timeframe and risk management strategy. The shorter the timeframe, the easier it becomes to make predictions, or informed odds based decisions. Just like in poker, all you are trying to do is put the odds in your favor.

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I realize there's a very very small percentage of people who do well timing the market, but I wouldn't feel comfortable advocating this strategy to anyone on this board. I can't predict the market in the short run, Buffet can't predict the market in the short run- but i realize there are some very unique people out there like you who can.

[/ QUOTE ]

One of the nice things about this forum, is you have a broad mix of people with various experience and styles. If you don't know what you are doing, you should invest in index funds. Learn a bit more, expand to some of jively's more diversified strategies. Want to put in more work, start looking at what others are doing... etc.

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Unless you can show us your past short term trading results, AND provide some detailed instruction on how to go about doing it, I believe it is immoral to attempt to steer posters towards a trading technique that is clearly inferior for 99+% of the population to use. Many trades and short holding times lead to increased transaction fees, and a higher frequency of taxable events in the form of short term cap gains. Besides the fact that attempting to time the direction of the markets seems preposterous to me at best.

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There are some people here who are interested in learning more than just the basics. That want to put more time and effort into learning techniques that have the potential to beat the market. DessertCat, Buffett, Scorpion, MrNow and myself, among others, bring these more advanced techniques to the table.

There are many different ways to game the market, if you want to put in the time. If not, stick to Index funds.

Poker hands are raked, the more hands the more rake... Why not just sit at the largest High Stakes NL table you can find with your entire bankroll and only play 1 raked hand? (see)

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I haven't quite perfected the buy stock X and then sell it when it drops 5% technique yet... I hope the OP runs good with this strategy. If I buy a stock and then it drops in price, I tend to buy more, NOT sell!

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Did that strategy work for you in the early 2000's?

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95% of the rich people I know of have had long positions for 10+ years, allowing retained earnings to compound over a long period, while creating very few taxable events.

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I have investments too... but I also have a trading port, because I want more than index matching returns.

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"In the short run, the market is a voting machine, but in the long run it is a weighing machine." - remember reading this somewhere? I assume by your post that you disagree with this author's sentiment?

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Depending on whether I'm in a trade or investment, will determine my interest in the long vs short term operation of the market. And, I will adjust my strategies based on timeframe acording to how the market is working in that timeframe, at the moment.

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p.s. Can you please tell me the price of BBW, or any other stock for that matter on 9/15/07? Let me know how certain you are about these predictions, whether it be 30%, 50%, 95%, or 100% certainty. Thank you very much in advance for this information. I expect to follow your advice to at least a 30-50% return annually. I'm going to use marketocracy for the first year, but after that I'll be ready to jump right in (assuming you deliver the goods the first year).

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For my daytrading, I don't care what its price will be on 9/15, until 9/15... and if I'm not trading BBW, I don't care what its priced at, even then [img]/images/graemlins/smile.gif[/img]

My primary concern is that when I buy a stock during the day that it will move in the direction I expect more often than it doesn't; and that if I am wrong that I can get out quickly. Such that my winners are larger than my losers, and my winners occur more frequently.

If I maintain the proper trading psychology amd proper risk management of my trading bankroll, just like a winning poker player, if I put myself in enough situations where the odds are in my favor, I know long term I will come out ahead.