Parlux Fragrances Sold

I threw in the towel on Parlux Fragrances (PARL) on Monday. After seeing a run up of over 10 percent Monday morning, I took action.

First, I scoured the web for any news that might have been released.  I checked Yahoo! Finance and Google for any new news but I found nothing. I also checked SEC EDGAR for any new filings and discovered none since October 4th.

Given that I found nothing new and it was a holiday Monday (Columbus Day) I decided that the fluctuation in Parlux share price might be short lived. I set a limit order for $6.25 for my 400 shares in the Special Situation Real Money Portfolio. The trade occurred shortly after I put in the order.

I’m really glad to be off this roller coaster. With the CEO continuing to dump shares and act irrationally, I saw a lot of risk.

This whole episode was a painful lesson. I really pulled the trigger too early on Parlux Fragrances when I heard the CEO was taking the company private. I really should have waited for an official SEC filing regarding the going private transaction.

So how much did this trade cost the Special Situation Real Money Portfolio? I lost $1,859.98, a 43 percent loss on my investment. This is the worse loss so far in the Special Situation Real Money Portfolio. I definitely won’t be bending my rules for investing in going private transactions in the future after this painful lesson.

On the positive side, the overall performance of the Special Situation Real Money Portfolio is still positive. I’ll provide the performance details later this week and update you on other transactions that have occurred since my last portfolio update.

5 thoughts on “Parlux Fragrances Sold

  • October 11, 2006 at 6:56 pm
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    I didn’t understand how irrational management was when I invested and am significantly underwater (my average cost basis is about $7). But I still think the value is there and am sticking with it for a while.

    But I’d sleep a lot better with a decent management in place!

  • October 12, 2006 at 10:54 am
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    NOW is the time to buy, not then. That is, if you think it’s a good value … one of the problems with value investing is buying on the way down. Best to learn some technical analysis, look for signs the stock has stopped falling, and then buy. Fat pitches often get fatter.

  • October 13, 2006 at 4:51 pm
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    Hi Bill –

    Thanks for providing a comment regarding Parlux. I agree that now would be the time to buy Parlux, but given all the non-arms-length transactions and other accounting issues, I don’t believe I can value Parlux. Given the CEO’s actions, I’m not sure what to believe now about this company.

  • October 18, 2006 at 9:41 am
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    Hey Bill –

    I hope you took your own advice and bought PARL. You’d be doing pretty well right now.

    I wish I had waited another week before getting out of PARL. The smoke and mirrors with that company was really starting to get me nervous.

  • October 18, 2006 at 11:12 am
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    I wish I had, but I was already 100% long and couldn’t figure out what to sell in order to buy it. I don’t like going long on margin.

    :-)

    I am getting very bullish as I am seeing many more opportunities than I have cash for! I need to sit down and prioritize all of the “buy” signals I’ve gotten in the last two weeks and maybe jettison some positions I like for ones I like more.

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