Like most folks on Hot Copper, I usually have absolutely no time...

Like most folks on Hot Copper, I usually have absolutely no time for self-proclaimed short sellers who are pushing a nonsense narrative to change the behaviour of buy-and-hold investors so they can profit from others' losses. In particular, the "there' were record LOW babies born last year" scare campaign seen here on HC in early 2023 which attempted to make holders sell and drive down the price.

This from today's media:





2022 looks like it will be lower / revert to the average, and that 2021 was an outlier. Also, the data only reflects the past. So 2023 may well be lower than the decade's average. We do now know yet.

In addition, we have record high migration rates, which will see more couples either having babies or bringing small children here with them. And the economy is in reasonable shape.

That said, @Volcanite has no doubt made a profit from his investment. Me, on the other hand is sitting on a 30+ % paper loss. So for all my positive macro theme talk, the profit warnings, the shocking share price graph, and the anticipated earnings per share tell a sobering story. Who would you rather be, me or Volcanite? Wait a second...don't answer that I appreciate the points he has made.

The point that interest rate rises affects the demographic likely to be first home buyers and new parents is a good one. Is it true? I don't know but it certainly sounds reasonable and I wish I'd thought of it before buying my first parcel of shares. Is most Baby Bunting goods purchased by grandparents (who aren't generally suffering from rate rises)? Maybe, to a small extent. Again, I don't know. What is next for BB: $1.00 or $1.50? No idea. How many babies are planned versus accidental and thus how elastic is the graph? I don't know that either. The price of housing would have to be a concern and I don't know how people survive with a million dollar mortgage, a child, and one income. We also do not know about inventory levels but Volcanite may be proven correct her too. Although as with Breville, maybe our goods are not too affected by tastes or trends, so unlike, say KMart or Target, it mightn't be a total disaster if inventory has risen.

I suspect many people are assuming the shares will automatically hit $1.00 based on the share price graph and recency bias. They are waiting for that magic $1.00 point to place a large order. Then there's a rebound to $1.37. If you are wondering, who has seen these short spikes in recent months and placed a small order after such a price spike, thinking, "We've hit the bottom and I should buy now or miss out", only to find the shares fall lower still, look no further. My holding is still very, very small but I am not looking to make that mistake yet again (I've already made it twice, in the guise of "dollar cost averaging"). Volcanite could well be correct about further to fall. I thought this might be a tough journey when I bought my first parcel at around $2.70, but I didn't imagine it would be this hard. In my mind I attached a defensiveness and moat to BB which did not exist in reality.

Commsec data shows consensus 11 cents EPS for the financial year. If it comes in at ten cents and we're at an even one dollar, that's a 10x PE ratio. I look at JB HiFi, Harvey Norman etc. at similar P/E levels now and think. It's about right. Could we come it at 12 or 13 cents? Not based upon the tone of the last market update and further rate tightening in the meantime. There is no way the advertised dividend holds up either. Commsec says 11.2%. Yeah right. An absolute dividend trap. At a PE ratio of 10-12 though, the market has completely discounted our future expansion plans down to nothing, and it assumes we are just another retailer, not the preeminent mother and baby store leader.

On a positive note, the Federal government seems keen to assist further with childcare fees. Interest rates will be cut at some point (not this year though), share prices are always 6-12 months ahead of what is happening in real-time today. And our competitors would be suffering too. Baby Bunting is still the sector leader. Qantas was hit hard in 2020 but the shares have tripled since Virgin left the domestic market, giving Qantas a huge monopoly since trading conditions changed. There is also the risk / opportunity of how good the new CEO will be.

Baby Bunting was established in 1979. It has survived difficult markets. I am sure we will get through this one too, and that margins and the share price will bounce back in the long term. In the next six months though, things could well get tougher for the company and the shares. If August's update is weak / weaker but the share price does not drop much further, we've probably hit the bottom. If / when the flow of money in the economy becomes looser and our profits rebound, I suspect those who felt very uneasy about buying in mid-2023 will be pleased with themselves for having done so. Don't listen to me though. I have been wrong about BB all year. Part of our terrible share price performance has been well deserved for operational reasons but it is partly (understandable) sentiment too, which will turn at some point.

I'm surprised that short selling has increased not decreased at a $1.37 share price. For now, I will say 'thanks, but no thanks' to Mr. Market's offer of $1.37. and wait for a better offer closer to $1.00. I suspect that in 3-5 years' time my small holding will still be small, but not as puny as today! I must admit, the rebound this week has surprised me but it would be pretty arrogant of me to again assume our shares are on a one-way path back to $2.00. For now, I am putting BB in the basket with a couple of other mistakes I've made in 2023 but will be reversed in the fullness of time