Wednesday, December 28, 2011


Long-time readers of this site are likely sick and tired of hearing about Parlux (PARL), a stock that has been discussed here many times. Fortunately for such readers, however, this may be the last post on this company, as Parlux received a friendly takeover offer that caused the stock to rise 70% yesterday.

I didn't get to participate in yesterday's gain, because as I mentioned in a previous post I was satisfied with the price gains the stock had seen a few months ago and so I sold out. A few commenters on that post, however, let me know that I was selling too early and they turned out to be right! The stock is now up some 900% from its March 2009 lows!

This return was achieved with below-market risk, in my opinion. Though the stock had high volatility (which is how risk is measured in mainstream finance), until now it sold in the market for a large discount to its net current assets. Furthermore, since company founder Fred Purches retook the helm a couple of years ago, it has returned to profitability.

A lot of the credit for these returns belongs to Purches, who cut costs commensurate with a new revenue environment, and got what looks to be a pretty good buy-out price from struggling retailer Perfumania (PERF), which fell 33% as a result of the deal! Purches told me that he will stay on board at least one more year, but that he is looking forward to retirement seeing as though he is now in his mid-70s.

The company also benefited from a fortuitous signing of Rihanna, who continues to amaze fans by coming out with hit after hit. She also appears to be one of the hardest working music artists around, constantly touring and recording, which has likely boosted the company's sales dramatically. (More than 15% of Parlux's revenue now comes from their Rihanna line.)

Congratulations to those who hung on!

Disclosure: No position

1 comment:

Anonymous said...

Great call nonetheless.

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