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Phil Scanlan is CEO of RxWorks, Inc www.rxworks.com , the developer of Practice Management Software used in Veterinary clinics in 17 countries around the world. He is also Founder and Chairman of WorldLingo Translations www.worldlingo.com , one of the leading online translation sites on the... More
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  • Sale - Cash at 20% off - Plus if you buy right now . . . 0 comments
    Aug 1, 2009 4:25 PM | about stocks: HLYS, SKX, CROX, ZQK

    Sounds like an infomercial, doesn't it?

    But basically it is why I bought Heelys (NASDAQ:HLYS). At March 31st they had $2.39 cash for each share and now you can buy a share for $1.88 or 20% off.

    Plus they have a pretty cool product that a lot of kids like that you effectively get for free. Basically Heelys are shoes with removable wheels in the heel that kids can scoot around on. You've seen them - walk, run, then roll.

    In fact the product was so cool, the share used to trade for over $30 back in 2007

    Maybe the company could have been managed better, the recession certainly did not help, but is the business really so bad they need to pay people to take their business off their hands?

    I do not think so. I think Heelys are one of those things that will be the craze with kids every few years. They have patent protection, so the market should not be flooded with knock offs. So next time the craze comes around - I would be thrilled if the price climbed back near those 2007 levels.

    They have tried to take Heelys to the teen market - the skate and surf crowd. It seems to me in better times, this may be a nice bolt on acquisition for a company like Quicksilver (NYSE:ZQK). Indeed it is less then a year ago that Skechers (NYSE:SKX) offered to pay $5.25 a share for Heelys (HLYS) - that is almost 3 times the current price.

    Now Heelys (HLYS) is not the only shoe company to find itself in this position. Remember Crocs (NASDAQ:CROX) used to trade above $80 and is now less then $4.

    So maybe the problems are not just company specific, but a reflection of the economy and industry. But Crocs (CROX) is not trading at less then cash value.

    Just to double check I was not totally mad, I had a look to see what mutual funds they have as shareholders. Fidelity has two of their funds invested in Heelys - Fidelity Small Cap Opportunities Fund (MUTF:FSOPX) and their FIDELITY ADVISOR VALUE STRATEGIES FUND - so I guess they see some hope for the company as well

    Now all this does not mean that management will not have burnt through some of that cash since March, they probably have, but I am hoping not too much.

    Disclosure: Long HLYS


    www.covestor.com/ext/widget?w=h&wid=8682

    <script language='javascript' src='www.covestor.com/ext/widget?w=h&wid=...;</script>

    Themes: FSOPX, FASPX, value Stocks: HLYS, SKX, CROX, ZQK
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