Crocs (CROX) – Case Study…Supply Trumps Demand

I made a lot of money in Crocs last year. The shortsellers are having their way with it this year. It’s a carcass at this point. The smart shortsellers entered the trade after the stock was broken in the 40’s. The lunatics started shorting at 20, 30, 40, 50, 60 and 70 only to cover in pain and miss the payday. A few lucky shortseller top tickers caught the big move, but the next rocket will blow them up so who cares about them.

The freaking story always ends the same way. It’s why you sell on the way up in a disciplined fashion and forget about catching tops. I remember selling in the 40’s and 50’s and selling the last piece was lazy. That in hindsight looks fine.

In May, I outlined how it would end because it’s always the same .

Crocs management had some power to manage this ending in a better way They behaved the same as management at all highflying stocks, they believed their own shit. The few that might have had religion and preached a diversification strategy would be SCOFFED at Board Meetings.

Here is what they should do in rapid succession:

1. Split 8 for 1 . That will confuse and frighten short-sellers.

2. Give away Crocs at airports all over the world. $20 million worth of Crocs in a weekend bonanza. Just hand them out as people approach the X-Ray machines. Instant customers. Instant.

3. Announce a share buyback.

4. Fire their Bankers for no reason. Just say the whores wanted us to dilute you, our wonderful common shareholders in a big public display. Use a Pinata that looks like the Goldman Sachs logo as you ring the opening Bell.

Here is What will likely Happen:

1. Goldman and other Bankers will convince management to do a massive secondary offering.

2. They will use that money to help you buy a bunch of useless companies

3. You will lose focus and Crocs Underwear will be a flop. Men with amazingly sweaty balls will sue you.

Stock will roundtrip.

Can’t say when

Now we know when. It will get worse before it gets better if it gets better at all. Great product for sure but the thrill is gone.

13 comments

  1. Soren says:

    God I hope they don’t follow your sound advice and that they have to go out of business. I’m looking forward to the day that I can buy kick ass sticky performance tires for my car made out of recycled crocs.

  2. I love you Howard! And now that your talikng business fundamentals and macro analysis I have more of a reason to read this blog daily. I didn’t think momentum traders cared about diversification strategies, etc. Good stuff!

  3. Jeffrey McLarty says:

    That’s and awesome summary. Wow. I went long from 43 to 69…nobody even believes me that I got out and in when I did. Too bad I went long again on the way down from $48, but the stupid people buying calls from me have let me average down to the low $30’s. I think I’ll keep selling out of the money calls to suckers then bail right before the next CC.

  4. Howard Lindzon says:

    i care about being right. Thats all.

    fundamentals are a crutch as are technicals.

    soren – I gave crocs these ideas on my blog in may. they sholuld have listened.

  5. Soren says:

    Maybe they are feeling guilty about unleashing such a fashion plague that they are now running the company into the ground to try and make up for it?

  6. Andrew Horowitz says:

    Do you have any idea how much crap I took standing alone as I wrote article after article about CROX? What…now it is finally dead and no credit for anything? Come on HL, give it up to me at least when there is clear proof. Short memory? I was the one who sent you txt when earnings were out to help you revel in your long pick then..even as we were short…Remember? HEY give a guy some credit… Best post of year? Yeah, but these could have been for 2007:
    http://www.thedisciplinedinvestor.com/blog/2007/08/06/crocs-rollercoaster/
    http://www.thedisciplinedinvestor.com/blog/2007/07/20/crocs-is-a-short2/
    http://www.thedisciplinedinvestor.com/blog/2007/06/18/crocs-insider-selling/
    http://www.thedisciplinedinvestor.com/blog/2007/06/07/crocs/

    I won’t bore you with the 5 Podcasts that begged listeners to sell that crap…

    Andrew

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