We’re taking VFC off of our Best Ideas Long list. We added it in April at $74 with the view that opacity around the stub quarter, the series of acquisitions, and FX were all obfuscating the underlying strength in the footwear and jeanswear businesses – and that these factors would clear up and lead to upgrades, upwards earnings revisions and a $95 stock by year-end. We’re still $3 shy of that price, but for the most part, the call largely played out. We’d be willing to hang in there for a few more bucks on the upside – as earnings expectations still look beatable – but we saw four sell-side upgrades in the week leading up to the print, and VFC is currently sitting with the highest number of Buy ratings since May ’16 and only 1.6% of the float short.
This was an atypical call for us, in that we are usually focused on names that will double over a TAIL duration. We were clear from the get-go that going long VFC did not fit that bill. This was a TREND call. It worked. And it’s time to focus our attention on fatter tailed ideas with more controversy like TPR, GIL, RH, and some potentially bigger ideas on our vetting bench (below). We’ll book this one and move on.
