HBI: Adding Hanes Brands to Investing Ideas (Short Side)

Takeaway: We are adding Hanes Brands to Investing Ideas today.

Editor's Note: Below is a brief summary of our high-conviction short thesis written by Hedgeye CEO Keith McCullough in Real-Time Alerts earlier todayPlease note that our Retail team will send out a full report next week. 

HBI: Adding Hanes Brands to Investing Ideas (Short Side) - z hanes

I haven't seen this many great short selling opportunities, well, since the beginning of Q3 2015 when we first went bearish on the SP500 and The Cycle.

On the Institutional Research side of our business (our biggest business by far) we added Hanes Brands (HBI) to our short list this week.  Per Brian McGough:

"We don’t like the Brands, don’t like Management, and don’t like the Company, but that alone is no reason to short a Stock.

 

What is, however, is the fact that we think that earnings and margins are at peak. We’re 7% below consensus this year, -20% in ’17, -30% in ‘18, and -40% by year 3. Some argue that stock might seem cheapish today at a mid-teens multiple and 5% FCF Yield – though we really don’t follow that logic. Once the dust clears from the acquisitions, special charges, and cotton prices normalize from the 7-year low, we think we’ll be looking at lower multiples on lower earnings and cash flow."