Chart of the Day
Commercial Printing in Secular Decline, Stocks a Potential Short Squeeze
- Commercial Printing has been the top performing Industrials sub-industry over the past 30 days, in what appears to be a bit of a short squeeze. Given that short interest is *one-third* of the float in names like RRD and QUAD, this could well continue.
- Substitution of digital media for print media has left the commercial printing industry with chronic excess capacity – it is a current example of an industry in decline.
- The industry is fragmented, impeding capacity rationalization, and facing a host of substitutes for printed materials including online bill pay, reduced mail volumes, e-books, PDAs (fewer printed calendars) and online magazine/blogs.
- A more significant squeeze in RRD or QUAD could present an interesting entry point for shorts in this troubled industry.
Sector Comment: Navistar’s call this morning raised more questions than answers for us. It seems that it did for the market as well. We expect to launch our next detailed “black book” on commercial trucking in coming weeks and will have more to say then. For now, we again note that NAV has significant liabilities (pension and debt) that make it less “cheap” than it feels relative to better organized competitors.
Reminder: Expert Call This Wednesday at 1PM
We have an expert call coming up on July 11th at 1PM to discuss AMR/US Air and other regulatory matters. Our expert will be Lisa Harig, a Partner at McBreen & Kopko and head of the firm’s Washington D.C. office. She is a former in-house counsel for Trans World Airlines, Inc. and BearingPoint, Inc. Ms. Harig represents domestic and international clients, including airlines and manufacturers. Her practice focuses on a wide range of corporate, transactional, compliance and regulatory matters, including representation before the U.S. Department of Transportation and Federal Aviation Administration. Please contact us or your Hedgeye Sales representative to participate.