ASX Hot Stocks: Billabong, Atlas Iron and RHG

The S&P / ASX 200 Index (Index: ^AXJO) (ASX: XJO) has slumped by 0.7% to close at 4,809.5 after weak Australian job ad numbers suggested unemployment is set to rise, and create a further drag on an economy attempting to deal with a slowing resources boom. Further falls in the gold price also saw our gold miners smashed, with the sector as a whole falling around 7.5%.

Here’s why these three stocks are hot right now.

Billabong International (ASX:BBG) shares rose another 2.5 cents or 9.6% to 28.5 cents, more than double its recent low of 12 cents. The struggling surf wear maker appears to be at the mercy of hedge funds who have bought up the company’s debt from the original lenders. In what appears to be an opportunistic move, the funds may be angling for a debt/equity swap which could see existing shareholders severely diluted. Unfortunately that may be the only option for the company to stay afloat.

Atlas Iron Limited (ASX:AGO) saw its shares smashed down 5.6% to 79.5 cents, after the miner announced that it was pushing ahead with the development of its fifth iron ore mine, Mt Webber. The project is expected to cost Atlas $146 million, which will be fully funded from the company’s existing cash. Shareholders may be worried that now is probably not the best time to be investing in iron ore expansion, given the massive ramp up by the larger miners, which could see a glut of iron ore supply and lead to lower prices.

RHG Limited (ASX:RHG) climbed 15% to 46 cents, after the company recommended shareholders accept a $144 million takeover from Resimac. RHG shareholders will receive 44.1 cents per share in cash, as well as a 3 cent fully franked dividend. That will end an eventful life for RHG. After listing for $2.50 a share in late 2007, the GFC basically killed the company’s business model of securitising mortgages when credit markets closed, and shares fell to around 5 cents a share. Notably, John Kinghorn, the founder of the company pocketed around $600 million from the float, which was ranked by the New York Times as the “world’s worst float of the decade”.

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Motley Fool writer/analyst Mike King owns shares in Billabong.

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