It’s been a busy week so far on Wall Street, with the ongoing debate raging on the air waves over whether the thousands of options traders who went long on GameStop and AMC Entertainment should be hung out to dry. Thus far most hedge funds who have been prepared to go on the record about it seem fairly sanguine about the Reddit forum that is coordinating billions in the market – Anthony Scaramucci, founder of hedge fund SkyBridge Capital was on Bloomberg last night said he did not see any reason for the SEC or anybody else to take action as he could not see that rules were being breached.
This is a week for unusual share moves, however, especially in stocks where there seems to be no reason for sudden price surges. Investors should be cautious about stock taking off to the moon suddenly, especially if there are a large number of hedge funds on the other side of the trade that may be forced to scramble to cover their shorts.
Build-A-Bear Workshop (BBW)
We’ve had some interesting movers on Wall Street yesterday: Build-A-Bear Workshop Inc (BBW) had a sudden and spectacular surge on huge and unprecedented volume, breaking trend from 4.77 to close at 6.78. It was a big jump for the stock, but it has been climbing solidly in the last six months. BBW does not look to us like a candidate for sustained shorting and does not really fit the profile.
Build-A-Bear Workshop is a specialty retailer of customised stuffed animals and related products beloved of kids under the age of 10. You could argue that it should be taking more of a hit due to so many retail outlets being closed by the pandemic, but it seems to have been doing well. It would actually fundamentally justify the enthusiasm we saw yesterday.
Short volume on BBW is actually trending down from highs back in May when it crossed 50%. While not yet at pre-pandemic levels, it is getting there. We have, however, seen some large short positions traded specifically in yesterday’s trading session, so one to watch today.
Naked Brand Group (NAKD)
Naked Brand Group [NAKD] was also up yesterday, 252%, a pronounced move for the fashion brand on the back of huge buy side volume. Naked Brand stock has been trending up too, but again with the massive buy orders on Wednesday. Short interest has also been declining. Expectations among longer term investors are that the retailer should ultimately benefit from a retreat in the pandemic in the US.
Naked Brand has been facing the prospect of being delisted from the Nasdaq if it can’t maintain a $1 share price. The company had also released news on its intention to build up its e-commerce and digital capabilities. NAKD stock usually changes hands to the tune of 150m shares per day – yesterday’s volume broke 950m.
Koss Corporation (KOSS)
Koss Corporation [KOSS] climbed even higher, this time it was up over 480%. Koss stock remains off its 52-week high of 69.79 and we saw some profit taking towards the end of the session. Again the volume seems to be coming from day traders for the most part. Shares in the company – which makes headphones – reached as high as 66, so not far off the 52-week marker.
Koss shares have been on a run since late Monday. It had previously reported a decrease in sales of 3.7% in the three months to the end of September, and with the absence of serious news from the company, pundits are again pointing to the hot money from day traders.
