Short Seller’s Journal: L Brands Is Extremely Overvalued

I am getting ready to launch a weekly commentary/investing/trading service.  The stock market is now more overvalued than at any time in history, especially when reported earnings are re-adjusted to peel away all of the non-cash fluff companies are now permitted pile into their GAAP and “Non GAAP” numbers.  It’s become a complete joke.

But this “legal” fraud has created an unprecedented opportunity to benefit from the eventual stock market collapse and make a lot of money from all the overvalued stocks that litter the stock market.

In addition, the precious metals sector – thanks to the extreme degree of Central Bank intervention – has become one of the best fundamental value/contrarian opportunities that we’ll see in our lifetime.  The mining stocks have never in the history of the stock market been cheaper in relation to the price of gold/silver.  There’s a literal sunken treasure trove of junior mining companies with highly economical gold/silver deposits and the ability to survive the downturn.  When this turns, these companies will take off the way the internet stocks took off in the late 1990s.

My newsletter will focus on short-sell ideas in the areas of the market that I believe are the most highly overvalued, like housing, retail and financial services and on the mining sector.  The reports will include a brief summary thesis on the stock ideas presented.  It will also include chart analysis, trading suggestions and suggested options strategies.  The newsletter will be an abbreviated version of my full-blown research reports.  You can access an example of what will be produced on a weekly here:   Short Seller’s Journal – Retail.

Here’s one example of an idea I will be presenting.  This analysis was submitted to Seeking Alpha this past week.   L Brands Is Extremely Overvalued 

The stock is priced for perfection; Aggressive debt issuance to finance share repurchases and dividends;  A stock valuation far in excess of industry peers; Heavy insider selling…One of the likely big drivers pushing LB’s stock price higher is the company’s aggressive share buyback program. The primary source of funds being used for this is debt issuance.

Ultimately, in the event that LB’s stock “re-aligns” with the valuation levels of its peers and with the S&P 500/XRT, I believe LB’s stock could potentially be cut in half from its November 27 close of $96.68.

One last idea to reduce the risk involved with outright shorting LB would be a pair trade in which the short in LB is paired with a corresponding long position in either XRT or the Market Vectors Retail ETF

There’s more on L Brands, including some graphs and a paired trade idea here: LINK


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