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April 16, 2008
Fads, Crocs and Google Trends
The current collapse in shoe company Crocs's stock has been nasty. It is off 73% this year, and 48% in the last week alone.
So, was it predictable? In the broadest sense, of course it was. All such consumer fads eventually go pffft, and there was little reason to expect shoe company Crocs would be different. The trouble comes in timing such things: Put your short position on too early and you'll get blown out of the position, too late and you miss all the returns, or even get hit by a bounce.
One amusing way of thinking about timing a fad stock like Crocs is to watch Google Trends. When did the consumer fascination with the stock crest and begin declining? Here is the answer (with a stretched scale to give rough visual comparison):
The upshot: In theory you might have timed things fairly nicely on a Crocs short by following Google Trends data for this faddish consumer product. Of course, that assumes Google released the Trends data on a timely basis, that there wasn't a huge upsurge in interest in crocodiles, etc., but it's still intriguing.
Can anyone think of any other fads -- ideally stock-related -- to which to apply this? Consumer fads are particularly well suited.
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