Editor's Note: Below is a brief excerpt from our Retail analyst Brian McGough's morning note Hedgeye Retail Direct. If you would like information on how you can access our institutional research email email@example.com.
Shorts outweigh longs on my position monitor by a factor of nearly 2 to 1. That said, with the market at record highs and the US economy entering Quad 4, there are still ways to win on the long side in retail. While there are plenty of potential winners on our Long Bench, here’s a summary of our current Best Ideas with latest thoughts.
Gildan Activewear (GIL)
My favorite long – despite being up 41% since we added it as a "Best Idea" Long side.
This name still has legs. It had a roadmap to $60 before announcing the new capacity add in Bangladesh…now we have a 2-year growth story that just turned into 4. That’s four years of capacity growth after not adding a drop of new capacity since 2013 at the same time there’s a need for new private label manufacturing, growth capacity for Fashion Basics – and GIL is the global low cost provider that dominates the Western Hemisphere.
Rare to find a situation when any new business opportunity around such a dominant core is higher margin rather than dilutive.
But with accelerating revenue and gross margins on top of low single digit SG&A growth (and conservative company guidance), the bears who think it's too expensive relative to Hanesbrands (HBI) are gonna look downright silly.
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