Hristina Beeva

Lot 78, Inc (OTCMKTS:LOTED) Gone, No Way Back

by Hristina Beeva June 14, 2013
While we expected the drop for Lot 78, Inc (OTCMKTS:LOTED) a bit sooner, there was no doubt of an upcoming freefall. The stock split bought the company some time, but in only two short weeks LOTED abandoned the heights, lowering to $1.30. This would still be equivalent to more than $5 in pre-split prices, but a far cry from the peak. On Tuesday this week, LOTED lost more than 37%. LOTED0614.png

On Thursday, LOTED lost more than 12%, following a series of even steeper drops. Also, selling volumes are growing in the past days, indicating a chain reaction that may speed up the fall even more. Levels below a dollar are an entirely realistic prediction, and LOTED may be lost to traders for a long time before any pumper decides to touch it again. CNTO0614.png

The company itself may blame short sellers, but LOTED is more of a case of a very loud promotional campaign. This attracted too many investors, created too much optimism and lifted the shares of a small fashion house to unsustainable heights. Even without short sellers, when promotions end, investors withdraw. On its own LOTED had little to show: a small revenue from selling high-end garments, some potential to develop a better distribution network, some interest from celebrities, but little to support the high market valuation.

The latest quarterly results showed a small contribution from the fashion sales:

  • Zero cash and cash equivalents
  • $209,000 revenues
  • $300,000 operating loss
  • $84,000 total liabilities

The data themselves did little to budge the stock, and optimism remained high. But the end of May was the beginning of the end for LOTED. Wall Street Buzz sent away its last email on May 22nd, surprisingly LOTED continued upward for a few more days, bounced a little on June 4th, but finally moved away, and is now more than 80% away from its peak. This is a typical fall for a pumped stock, of which we warn every time.

The new selection for Wall Street Buzz is already here- Centor, Inc. (OTCBB:CNTO), so far moving sideways on higher volumes. The company, a gold miner, is a more standard selection than a fashion company and so far it's hard to tell where it would go, but the higher interest may translate into a price trend. In any case, it is best to avoid heavily pumped stocks, especially if they show a steep trend up, unless you are also able to absorb the losses.

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