Point Counterpoint: GES, LIZ, RL, SKX, COLM, CROX

Here’s the latest intersection between Keith’s factor models, and my fundamental models. Combining the two has improved our team’s batting average. Lots of opportunity out there…

KEITH: GES lined up to be knocked down again. From here to 25.96 it’s a short. Any catalysts?
BRIAN: Yes. When the company comes out with earnings in another month, it will take down numbers.

KEITH: LIZ has a lot of work to do, but if it can hold 7.32, it has a prayer.
BRIAN: A lot of work to do indeed. But we’re going to start to see more of that work payoff over the next 2 quarters. The P&L is a mess, but people are looking through capex and sg&a cuts. Cash trajectory looks good to me.

KEITH: SKX failed right where it should have (13.48); it will see $11, soon, if the fundamental river card shows.
BRIAN: Let me be clear on this one… I think margins are going close to zero. But I’m not sure we’ll see Keith’s fundamental river card before year end.

BRIAN: My gut (and my math) gets me to a beat on the quarter, and if there is a guide down, it should not be by much. For a global power brand like RL that is coming off a period of investing in both its P&L and balance sheet while many competitors have been doing the opposite, I like its competitive positioning at 6x EBITDA.
KEITH: Stock was a buy at 38 on the prospect of a beat on the Q… not at 48.
Editor’s (Brian’s) Note: The key factor here in our differing view is duration mismatch.

KEITH: COLM holding 35.76 looks like a long.
BRIAN: I agree on the fundamentals here. Not rosy by any means, especially with Spring backlog so weak. But COLM is 3-quarters into a period of SG&A investment that I have been waiting for five years to see. The company is finally investing in its content. Don’t underestimate how that could reverse the trajectory of a flailing top line.

KEITH: CROX has 29% of the shares held short, and is now a long provided it can hold 2.48. Up another 26% Tuesday. Someone knows something …
BRIAN: If someone knows something imminent, it’s not me. Imminently, earnings/cash flow is a black hole. CROX should have reported yesterday, but they have not even announced their reporting date. Fundamentally, I like the idea of a take-out. Enterprise value of $232mm, and regardless of the ‘fad-factor’ of its core product, I think Crocs is a brand, not a product. Someone larger will own this company within a year. My bet rests with Skechers, which can buy CROX with its cash on hand. The duration of a call on this one is the biggest question in my mind.

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