Author Topic: DDS - Dillard's  (Read 10133 times)

Gregmal

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Re: DDS - Dillard's
« Reply #30 on: September 12, 2019, 07:25:29 AM »
Don't be salty, you made a great trade. Pat on the back!

Serious question: do you actually think the squeeze thesis is any good on a fundamental basis? Because this seems a bit like a 'Burford-trade' in reverse: generate a lot of hype (in this case about a short squeeze in a stock with a very low float) and the desired result will follow, regardless of the fundamentals. But shares are actually down today and the borrow fee is also down since August. I thought the 'mox-report' wasn't very convincing and in fact it looks pretty much like something Muddywaters could have written. Also, the DDS super squeeze story has been around for years - looks like people are starting to anticipate / expect it.

Not that there is anything wrong with making money because of people hyping a possible short squeeze rather than an actual short squeeze occurring. I made some money on the short side in Burford as well despite having no strong view on fundamentals.

I agree with you that DDS is an interesting stock on multiple levels.

I don't really think they have much in common. MW on Burford was basically loud screaming of things people already knew, egregious misrepresentation, and capitalizing on reputational impact in order to more or less move the market. Mox report was pretty straight forward. Its a math trade. DDS as a retailer is kind of crummy, but not the worst out there. To a certain extent, sure; word getting out about short interest and the stock getting squeezed is a bit of self fulfilling prophecy. But its also a play on understanding market psychology. Ive been on the wrong end of short squeezes before; knowing what that feels like helps understand what drives this(it still may get squeezed more btw). So on that front, Pearson was 100% clear what he was looking to do here and I thought represented things in a fairly straight forward manner. Whereas Muddy Waters on the other hand...

The home run scenario, again just analyzing the math end of this trade, would have been a repurchase number around what Unemon suggested. Free float is now significantly below shares short. Which then points to the obvious fact that some holders of the stock, that arent part of the free float are lending out the stock. Which if that's the case, you better believe once it is public what the difference between short interest and float is, guess what those holders are doing? Pulling the borrow. Thats where the really fireworks would happen.


EDIT: and btw, if you want to see a real short piece. Check out Pearson's Forcefield Energy writeup. Or just check the FNRG chart. Gives new meaning to the term "killing it".
« Last Edit: September 12, 2019, 07:39:59 AM by Gregmal »


writser

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Re: DDS - Dillard's
« Reply #31 on: September 12, 2019, 08:15:45 AM »
Quote
you better believe once it is public what the difference between short interest and float is, guess what those holders are doing? Pulling the borrow. Thats where the really fireworks would happen.

I don't think it is a secret, exactly .. And second, where I think the analysis is flawed: I think it is extremely unlikely that Blackrock, Vanguard, State Street, Northern Trust etc. will pull the borrow in an orchestrated short squeeze. They are in the business of tracking indices and being boring asset managers- not in the business of generating squeezes for short-term profits. Even the founding family is probably happy with the status quo: lend out the shares for a juicy fee while letting others depress the price at which they can buy back shares. What are they gaining from a short-squeeze? Some short term gains (and they'd only be able to sell a small amount of shares), a lot of reputational damage and a pause in their buyback program.
« Last Edit: September 12, 2019, 08:20:49 AM by writser »
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Gregmal

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Re: DDS - Dillard's
« Reply #32 on: September 12, 2019, 08:20:03 AM »
Quote
you better believe once it is public what the difference between short interest and float is, guess what those holders are doing? Pulling the borrow. Thats where the really fireworks would happen.

I don't think it is a secret, exactly .. And second, where I think the analysis is flawed: the short interest is 77% of the free float. Yes, that number, or whatever it currently is, is high. However, I think it is unlikely that Blackrock, Vanguard, State Street, Northern Trust etc. will pull the borrow in an orchestrated short squeeze. They are in the business of tracking indices - not in the business of generating squeezes for short-term profits. Even the founding family is probably happy with the status quo: lend out the shares for a juicy fee while letting others depress the price at which they can buy back shares. What are they gaining from a short-squeeze? Some short term gains (and they'd only be able to sell a small amount of shares), a lot of reputational damage and a pause in their buyback program.

You don't think perhaps, lets say a desperate hedge fund manager who's badly in need of some returns and could also benefit from a public "win" wouldn't do such a thing? You dont think David Einhorn(who's long been little more than a trader of the stock) would do such a thing?

writser

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Re: DDS - Dillard's
« Reply #33 on: September 12, 2019, 08:22:32 AM »
Sure. I didn't name Einhorn in my post, did I? I was just pointing out who in my opinion will not pull the borrow and these investors happen to own ~13m shares or whatever.
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Gregmal

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Re: DDS - Dillard's
« Reply #34 on: September 12, 2019, 08:27:45 AM »
Sure. I didn't name Einhorn in my post, did I? I was just pointing out who in my opinion will not pull the borrow and these investors happen to own ~13m shares or whatever.

Got it. Just some fun discussion on a unique name that's worth keeping an eye on.

writser

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Re: DDS - Dillard's
« Reply #35 on: September 12, 2019, 08:49:18 AM »
Yes. FWIW I do see some potential for some short shenanigans. I just thought that the whole 'look they bought back a lot of shares and nobody knows about it, wait for the 10Q' thesis was a bit overdone. Honestly if you use terms like 'upside perfect storm', 'violent upward price spikes', 'hyper-aggressive buybacks' and 'kitchen sink PR gambit' (wtf..) in your reports you are just as promotional as Muddy Waters. Only on the long side and then nobody cares.

DDS has been buying back shares for ages. Everybody knows about it. The huge short interest isn't exactly a secret either. I think the article contained zero new insights. They simply rehashed their old articles (which both appear both to have been posted around the yearly high?)  but the trade worked out nicely.
« Last Edit: September 12, 2019, 08:55:35 AM by writser »
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RuleNumberOne

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Re: DDS - Dillard's
« Reply #36 on: September 12, 2019, 08:54:20 AM »
There is no need for any shorts to cover unless the company becomes profitable.

A stock that is guaranteed to go to $0 should have all its shares outstanding shorted at $30.
A stock that is guaranteed to go to $0 + $30 should have all its shares outstanding shorted at $30 + $30.

If you can't turn a profit when the US consumer is super-healthy and in a big spending mood, you are guaranteed to go bust during the next recession. A few days ago Barron's presented a list of retailers that filed for bankruptcy this year. Dillards will eventually join that list.

Shorts should just be patient.

Cardboard

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Re: DDS - Dillard's
« Reply #37 on: September 12, 2019, 09:11:19 AM »
Hey RuleNumberOne, if you wanted to at least properly argue with what I stated, it would be wiser to highlight full year number comparisons instead of what happened in the last quarter which is slowest for a retailer.

Maybe that you are short or whatever and I don't really care but, if you want to spread the truth as you claim to be then please try to do so. Same store sales declining 1 or 2% is not the end of the world and guaranteed bankruptcy in case you didn't know.

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RuleNumberOne

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Re: DDS - Dillard's
« Reply #38 on: September 12, 2019, 09:14:24 AM »
If it weren't for gain on asset sales it would look worse.

If it makes you happier, we can look at 5-year comparisons instead of 1-year.

The founder's 74-year-old son is perhaps looking at 50-year comparisons and buying back stock. He joined the company in 1967.

Hey RuleNumberOne, if you wanted to at least properly argue with what I stated, it would be wiser to highlight full year number comparisons instead of what happened in the last quarter which is slowest for a retailer.

Maybe that you are short or whatever and I don't really care but, if you want to spread the truth as you claim to be then please try to do so. Same store sales declining 1 or 2% is not the end of the world and guaranteed bankruptcy in case you didn't know.

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Gregmal

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Re: DDS - Dillard's
« Reply #39 on: September 12, 2019, 09:32:09 AM »
On paper, yea just hold the short. In actuality, itís not that simple. A lot can happen that is out of your control or forces you to change direction. Whatís unique about some of these perspectives is that the authors are predominantly short biased. So they have a very deep understanding of the mechanics at play here.

Rulenumberone, question. Theoretical. Youíre short, and the stock goes against you 30%. Youíre prime informs you that your borrow is gone. You have 3 days to buy in. Next day youíre notified that they have a few shares to borrow but the neg went from 15% to 60%. Meaning to keep the trade on youíre paying 5% a month to borrow. What do you do?