Formaldehyde & Search Warrants

It’s been a while since we checked in on our friends at Lumber Liquidators (LL) and a lot has transpired since we first published our short thesis on the stock in December 2010.  After a brief rally in Q1-11, shares were effectively cut in half over the next couple quarters, before bottoming at $13.43 and rallying to a high of $120 earlier this year!!  While we haven’t had a position in the stock since 2011, and don’t plan on initiating new shorts anytime soon, Whitney Tilson’s recent presentation at the Robin Hood Investors Conference provides a good overview of the bear case for Lumber Liquidators, which has only gotten stronger since we last looked.

In the meantime, we feel cash is a more effective hedge against potential market dislocations given today’s liquidity-driven environment.  Simply stated, with central banks pushing asset prices higher regardless of fundamentals, shit floats to the top.  And with that said, we’ve embedded the slide deck below.

Why I'm Short LL