Technically, undergarment maker Naked Brand Group (NASDAQ:NAKD) is one of the best performers of the year so far. Since January’s opening session, NAKD stock has delivered both longtime shareholders and recent speculators nearly 300%.
That’s a bonkers figure, one that takes away some of the pain associated with this investment, depending on when you booked it.
Naturally, with such an outrageous rally, NAKD stock has attracted many opinions. At least from what I can gather from my InvestorPlace colleagues, most of it is negative. For me, my friend Will Ashworth may have best summed up the pessimistic perspective, noting that he wouldn’t touch shares with a “five-foot pole.”
In Ashworth’s opinion, NAKD stock is finally trading where it belongs: under a buck. Due to a ridiculous valuation, it doesn’t make sense for shares to be trading any higher. And while he does give credit to management for its efforts in attempting a more-effective capital allocation after selling some equity at its suddenly elevated premium, this is a task that’s easier said than done.
However, he did pull back a bit on his opinion of NAKD stock. He once stated that he wouldn’t touch shares with a 10-foot pole, so that’s something, I suppose.
Still, not everybody is negative on the undergarment maker. Recently, InvestorPlace contributor GS Early took a crack at the bullish thesis for NAKD stock, noting in part that there’s a certain incentive to buying shares:
One thing that has truly helped move this space forward is the pandemic. Whether it’s to treat yourself to something nice that no one can see on a video call or to spice things up with a partner that you’ve been living on top of for the past year, intimate apparel or even just some interesting new underwear can be a good, relatively low-cost way to start.
Will some hanky-panky lift Naked Brand Group? I wouldn’t count on it.
NAKD Stock Time Travels
One of the intriguing aspects of the investment markets is that two people can look at the same data and come away with different interpretations. For instance, I contended that the novel coronavirus pandemic was the worst thing that could happen to NAKD stock.
Why? Because people are cooped up at home, sucking the life out of the dating game. And even if you could venture out during the lockdowns, many chose not to because of the fear of getting infected with Covid-19. Therefore, without that intimacy incentive, undergarment demand will suffer.
As for people who already have partners, even here, the data doesn’t bode well for NAKD stock. That’s because The Wall Street Journal — hardly the paragon of sensationalism — reports that there’s a baby bust across several developed nations. So that takes the life out of Naked Brand’s international expansion ambitions.
But the biggest concern for NAKD in my view is its own technical history. Back during the late summer of 2014, Naked Brand shares skyrocketed, similar in fashion in how they rallied sharply in late January of this year.
At the time, most speculators probably thought that the time had come for Naked to really show the world what it could do. However, Aug. 11, 2014 was the peak. Since then, shares steadily began to erode, much like they’re doing right now.
In fact, the price action between July 16 – Sept. 15, 2014 and the price action from Jan. 4 – March 5, 2021 of this year share a statistically significant 67% correlation coefficient. That’s not something to gloss over, especially when you’re dealing with an emotional stock which has very questionable fundamentals to put it nicely.
If you decide to gamble, you’re not only betting against common wisdom but also NAKD’s own trend dynamics.
Singles Are Lonely, Couples Are Hurting
Another factor you must remember with NAKD stock is that the people who are together may not necessarily want to stay that way. However, the lockdown measures forced many women into terrible situations, where they could neither physically escape abusive relationships nor be able to do so financially because of the economic turmoil.
I’m not suggesting that every couple is in a rough patch. But there is a thing about seeing the same person 24/7. At least with a job, people could develop their own identity outside of a relationship. Now, people don’t have that natural ebb-and-flow outlet, causing perhaps good relationships to go sour.
This adds up to negative fundamental pressure on NAKD shares. Combine that with the technical issues and you have a case where it’s probably best to leave this “opportunity” alone.
On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article.
A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare.