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.