Hedgeye CEO Keith McCullough is adding Ralph Lauren (RL) to the short side of Investing Ideas. Below is a brief note.
Looks like some of the bears overstayed their welcome last week, pressing shorts right when they should have covered... It happens. Not many in this game are known to be good at the short side, across cycles...
What I like to do is wait on it... yep, wait for Bearish @Hedgeye TRENDs to get squeezed towards the top-end of my @Hedgeye Risk Ranges, especially into a market close...
That’s happening with Ralph (RL) today. Here's part of Retail analyst Brian McGough's Institutional Research note on RL from this morning, addressing the High Short Interest ... but also the downside, from here:
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My only concern is that Short Interest is ~12% of the float, which is a critical level for us at Hedgeye. But ultimately, I think that the model will prove the shorts right, and then some. This stock is worth 12x recovery earnings of $5, or $60 vs the current price of $78. We wouldn’t own it until the stock price started with a $5-handle – and even then would do so nervously given the secular challenges that face the company. |
Sell the bounce,
KM