This story concerns an intimate apparel and swimwear company, Naked Brand Group (NASDAQ:NAKD), that saw its share price sink so skinny-dipping’ low that you’d think it was trying to live up to its name. For six bucks, you can either buy 31 shares of NAKD stock or a 46 oz. bottle of Naked Green Machine fruit smoothie. The brands aren’t related, but you can guess which purchase offers the better value. Or, if you prefer, more green. (Hint: It’s the one on your grocery list, not the NASDAQ list.)
The 12-month run for NAKD stock, in fact, has been horrendous. Down 90%, it hasn’t seen the $1 mark since mid-June. Naked Brand’s market cap has shriveled to $17.7 million. No analysts follow it. And as of Nov. 27, it has 180 days (or until May 24, 2021) to regain compliance with NASDAQ’s minimum share price of $1.
With all this going against it, you might wonder why this company deserves any attention at all. Here we must cite whatever wisdom there is (and some would say none) in eyeing a sizable penny stock purchase. When an investment sinks this far down, there’s nowhere to go but up — or even lower down, as in six feet under. Now I normally treat penny stocks with the same hairy eyeball as fake diamonds. But could NAKD stock be an outlier? That is, a diamond in the buff?
Naked and the Dead
Before we get Naked — as in buying NAKD stock, that is — let’s consider what evidence might support any kind of return to form for this New York-based company with overseas roots in New Zealand. Might I offer one far-fetched idea: Naked Brand owns the iconic and campy Fredericks of Hollywood imprint. Maybe some creative leveraging of that line might give this struggling company some momentum. Any momentum.
Go ahead and call it a lame idea. At least it beats whatever brainstorming might be taking place at Naked Central. As far back as July, InvestorPlace’s Chris Markoch wrote that “A deeper dive made me realize that this is not a company that’s in it for the long haul, and by the look of the NAKD stock, it may not be in business for much longer.”
Five months later, this remains the case. You could look at it and say, “Hey, they’ve held out this long, maybe they’ve still got some fight left.” More likely, the company is floating next to lifelessly, waiting for something, anything to put it out of its misery.
NAKD Stock and the Apparel Brand Fail
From a marketplace level, getting to the bottom of what’s wrong here literally demands digging to the bottom of a man’s underwear drawer in search of his drawers. There you’re highly unlikely to find much if any allegiance to branded underwear. Simply put, undies are not a fashion item men care all that much about. And that reflects the fatal flaw in Naked’s value prop to consumers in a nutshell (which, no, is not a nickname for underwear).
Of course, there is always the hope that NAKD stock will undergo some sort of speculation gyration to propel it above $1 and thus avoid delisting. But is trying to anticipate and catch that wave truly smart investing? Or is the prospect of a speculator-driven rally supported by the slightest speck of evidence? Speaking of speculation, that’s all I’m doing here. Still, I doubt I’m the only one who, where this investment is concerned, can only offer wild guesses.
That is not where you want to be. Trust someone who has seen the ravages of penny stocks firsthand. My father lost a fortune investing in them. As a compulsive gambler, he probably didn’t see much if any difference between a penny stock and a blackjack bet. Though, if you counted cards back in the day, you had more sense of your fate than any NAKD stock investor does today.
Speaking of Naked and gambling, that blackjack analogy might work even better with strip poker. If you lose in strip poker, you wind up naked. And if you lose with NAKD stock, you wind up stripped. Either way, the cash is gone.
Misplace Your Bets
Not to beat a dead horse, but let’s beat a dead horse: NAKD stock is a bet. A bad bet. That’s all. Normally I might say, “Throw some chump change at it and see what happens.” But frankly, that’s a waste of your chump change. This is, after all, a company that saw its fiscal year 2020 net sales fall to $58.5 million from $72.7 million the previous year.
Or maybe buying your adrenaline shots in 19-cent doses is your thing. If so, knock yourself out and don’t let my earnest attempts to warn you stand in the way. Just keep in mind that with Naked Brand Group, conventional tools such as Bloomberg Terminals or the careful parsing of earnings calls simply won’t cut it. Instead, you will need a Ouija board, Magic 8-Ball, newspaper horoscope columns and some enchanted beans.
Trust me, this will work. It has to work. At least it must work better than the random guesswork we might otherwise employ, right? Because that’s all we’ve got. It’s all my InvestorPlace colleagues have. Not even the folks at Naked seem capable of doing any better. Getting any clues out of them, through the media or otherwise, amounts to a futile task.
But if it’s riches you seek, just think of all the wonderful puns I’ve deposited here along with others you can discover for yourself. That’s right: Naked is yours to discover. But why invest in a stock that belongs in a bare market?
Then again, I’m guessing you nude that already.
On the date of publication, Lou Carlozo did not have (either directly or indirectly) any positions in the securities mentioned in this article.
