A quick note from Industrials analyst Jay Van Sciver:
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Since we added BLL as a short in September, it has declined, lagging the market by about 11%. As we review beverage can shipment growth this morning, it appears inconsistent with our thesis. More broadly, we want to migrate away from some of our non-cyclical shorts that we entered last year – it was a tough year for shorting, but not in the ROL, TNET, NSP, BLLs and whatnot. As we discussed in our themes deck, declining industrial production may shift investors back into (admittedly overvalued) less GDP exposed equities. We don’t much want to fight the tide, and much prefer the CMIs and ROPs on the bearish side at present. To be clear, we do not think aluminum cans will become a growth industry. We think vertical integration is the structural vulnerability that limits returns for BLL – it is a less good industry than it looks. We will look to re-enter BLL should the data better support our broader thesis. Compares get harder again later this year, which may set-up a re-entry opportunity. |
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It is the combination of our thematic change & the data prompting this move – in general, BLL’s volumes don’t correlate all that well with industry volume |
