Wednesday, December 10, 2008

Short Idea - VFC

I wasn't paying much attention to the "sales" and "deals" that the North Face [.com] (yes I subscribe to them) was sending me, but after being bombarded with many emails in the past couple weeks, I realized that they could be a good short candidate once this rally runs it course. Retailers should get smashed (once again) once their 4Q numbers come out next January/February. (VFC is the parent company, which has a whole lot of other retail companies under them.)

Now why did I think to short them after getting bombarded with their "sales" e-mails? To me, it speaks volumes about how bad they need customers/cash. For the most part, the North Face fad is over, and everyone and their mom has one by now. Out of the other retailers in that brands list, it would make sense if the North Face was one of their best products with the highest margins. So as you may have noticed, or not, the deals that the retailers have been putting on (at least for clothing) have been many and steep. The retailers are hurting for money, and it's looking to be a bad Christmas season for them.

Here's the chart:

It's had a full retracement back to the Obama (Election) highs from Nov 4th. That retracement coincides with the declining 50DMA as well as a decent trendline that if, falls below, would make it a great short candidate. I will be eyeing this one closely as a potential short to put capital towards rather than towards the regular index shorts.

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