Below is a brief note written by CEO Keith McCullough:
|
Another way to think about month-end markups (especially in less liquid, smaller cap names) is that you get to pick them off on the short side at lower-highs before the next decline. One of Brian McGough's best new ideas (on the short side) has been Canada Goose (GOOS). Here's what he wrote (to our Institutional Subscribers) at the beginning of June: “We added GOOS to our Best Idea Short list 2 weeks ago calling for 50%+ downside in the stock. While I’ll definitely take the selloff since last week's print, let’s not forget that there’s still at least another 30%+ downside left in this stock. This stock is stuck in growth purgatory – and broken growth stocks don’t work in Macro Quad 4 (actually, they don’t work in any Quad). There is a fundamental disconnect between $4.1bn in equity value and the trajectory of the profitability of the core business, and the inherent risk to growing outside of its coat business. We’re probably going to see some obligatory downgrades on this name tomorrow morning – but ultimately I think the bulls will come out and defend it. They will defend guidance as a conservative starting place and that this is Moncler 2.0 (which it's absolutely not). They likely don't share my view that there’s there’s 1,000bps downside in risk to margins embedded in this model as it transitions away from its core jacket into innerwear/knitwear – something that wholesalers (and ultimately consumers) largely don’t want from Canada Goose. As part of our diligence for our presentation, my team had a call with a private outwear buyer in Canada yesterday noting that wholesalers -- and presumably consumers -- have little appetite for anything other than its core coat offering, and that might even be getting thin – especially as stores open adjacent to the best wholesale doors. We’re presenting our Black Book on GOOS tomorrow, June 5th at 12:30 to outline the bear case from here, which I still think is powerful.” Short the bounce, |
