High-conviction short ideas
Dick’s Sporting Goods (DKS) - the Foot Locker acquisition will go down as one of the most value-destructive deals in retail history. The first time DKS misses a quarter because of perennial weakness at FL, this newco will trade at 3-4x EBITDA.
Best Buy (BBY) - 100% of EBIT comes from extended warranties, credit and membership - all of which are facing cyclical and secular pressure. Tariffs could take margins to zero, spurring a massive round of store closures.
Lam Research (LRCX) - the most complacent name in semicaps with 2026 WFE expectations set too high especially in DRAM. P/E now 4.5x turns above 3-yr average despite little growth in 2026. Domestic competition in China intensifying longer-term.
Edition: 218
- 22 August, 2025
Consumer Discretionary
R5's research reveals BBY’s business model is suffering from potential systemic challenges around its go-to-market strategy. Specifically, its high-touch showrooming model is under siege, in large part, due to an unprecedented crime wave impacting its stores. Management’s reaction has been to remove product from the floor or lock it up, transforming many stores to go from a showcase to a rather empty, uninspiring experience. This, in combination with flagging demand, deteriorating store conditions and supply chain challenges, leads Scott Mushkin to downgrade the stock to Sell.
Edition: 141
- 05 August, 2022
Consumer Discretionary
After two years of stellar Covid era growth, BBY has seen a sharp and (so far) enduring drop in its traffic momentum - as the category leader, BBY would normally pick up the mantle of expanding or innovating the entire consumer electronics market. However, discretionary consumer spending is rotating to outdoor-focused spending ranging from sports and camping to travel and dining out. BBY must take bold steps to break out of its funk. New initiatives in health, fitness and finances may help, but it must keep bringing innovation to bear.
Edition: 136
- 27 May, 2022
Consumer Discretionary
Don’t be put off by daunting 1H22 comps - Scott Mushkin sees several positives coming together for the company over the next 12-24 months that ultimately have the potential to accelerate revenue growth over the next several years. Initiatives around optimising the store base / experience and its new Totaltech membership will collide with a powerful technology innovation cycle that will touch almost every category in the store. BBY is in a unique position to capitalise and grow market share given its omnichannel capabilities, superior / knowledgeable employee base, national footprint and importance to consumer electronic vendors. TP $140 (40% upside).
Edition: 127
- 21 January, 2022
Flying Fortresses: Making Money with a Margin of Safety
Less than half a percent of the stock market is trading below 10x earnings today - the lowest level ever. Kailash’s latest piece aims to help investors looking to add a bit of deep value to their portfolios. These firms must have a market cap of $1bn+, a 10% FCF yield, be investment grade, and growing revenues at 5% or more. Investing in these “Flying Fortress” stocks has, historically, generated outsized returns. Stocks highlighted include Best Buy, PulteGroup, Molina Healthcare and Polaris.
Edition: 113
- 25 June, 2021