RL: KM Shorting for a Trade

Keith shorted RL in the Hedgeye virtual portfolio with the stock breaking through its intermediate-term TREND line of support and immediate-term downside to $113.88. Even though the 4Q print changes nothing related to our long-term call regarding $9 in EPS power and we still think RL will beat this year by +6% relative to consensus, we are shaking out below the Street in the upcoming quarter. Not only were we surprised the stock didn’t trade off more meaningfully following the miss, but perhaps even more so in the ensuing rebound. Trading above $123,  the stock is simply overbought relative to Keith’s model on an immediate-term TRADE basis.

See our recent post on 5/25 “RL: Great Company/Strategy, Bad Stock” for our more detailed view on the stock by duration.

RL: KM Shorting for a Trade - RL VP 6 3 11