A NJ Deli that Was Worth Nine Digits

Hometown International (HWIN) Talking Points:

• One of the more peculiar stories of the New Year and this aggressive risk-on theme in stocks has been that of Hometown International, highlighted by Greenlight Capital’s David Einhorn in a recent note.
• This New Jersey deli was publicly listed in 2020 and saw massive price appreciation, eventually eclipsing a $100m market cap.
• But the company only had around $35,000 in sales over that time, highlighting a massive inefficiency.

Hometown International Inc (HWIN) is another OTC-traded asset in news headlines. Hedge fund manager David Einhorn sounded alarms about the company in a recent client letter. “Someone pointed us to Hometown International (HWIN), which owns a single deli in rural New Jersey. The deli had $21,772 in sales in 2019 and only $13,976 in 2020, as it was closed due to COVID from March to September. HWIN reached a market cap of $113 million on February 8…. The pastrami must be amazing.” While this OTC stock is not typical of the retail market mania, Einhorn’s note drew attention of financial media, retail traders and the OTC exchange operator. It was delisted on April 21st for not meeting listing requirements, meaning that retail traders looking to purchase this meme are now out of luck.

Since being delisted there’s little reason to share any type of analysis. The point of Mr. Einhorn’s note and comments on the topic appear to highlight just how aggressive market participants have become, allowing a small deli with less than $35k in sales over two years to trade at a nine-digit valuation.

When cash is cheap, people often take on more risk. And when cash remains cheap for a long time and many of the perceived bargains have become ‘expensive,’ investors may look deep in the couch cushions to try to find that extra ROI. This defines the current environment, with outlandish gains seen in meme coins like Dogecoin. While opportunity seems abundant, there’s risk, too, and it’s an important to know what you’re investing in. Or else you might end up long a New Jersey Deli at an outlandish valuation.

Hometown International (HWIN) Weekly Price Chart

Chart created by James Stanley, Source: TradingView

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— written by Izaac Brook, DailyFX Research Intern, James Stanley, Senior Strategist