Evan Hornbuckle Long Under Armour: Capitalize For Kids Conference 2018

We're posting up notes from the Capitalize For Kids 2018 investment conference.  Next up is Evan Hornbuckle of Wellington Management who pitched a long of Under Armour (UA).


Evan Hornbuckle's Capitalize For Kids Presentation: Long Under Armour

Brand turnaround, trough sentiment, under-earning and unloved

•    Many successful consumer turnarounds – LULU, Nike, Adidas, Puma
•    New management not “growth at all costs” ROIC, gross margin oriented
•    Extremely high short interest
•    Cheap if you look forward 3 years, put normalized EBIT margin (9%) and historical earnings multiple (30x)
•    UA overbuilt opex and inventory to prep for $10bn in sales, Sports Authority went bankrupt and didn’t downsize fast enough. Tried to grow into it
•    Liquidating excess inventory, beating 2018 guidance. Has a large markdown reserve account ($144mm) which once released is ~2018 EBITDA.
•    Another $80mm in gross cost savings announced, unclear if it will be used to reinvest in business

Base case – 3 year outlook

•    Sales – 8% CAGR [assumes modest global share gains in the category]EBIT Margin 9% [ 6-7 year average] 30x Multiple [ very rarely traded below this multiple before the recent blow up]


Be sure to check out the rest of the presentations from Capitalize For Kids 2018. 

What We're Reading ~ 5/3/17

The Innovator's Dilemma: When New Technologies Cause Great Firms to Fail [Christensen]

Warren Buffett's money managers Combs and Weschler speak [Yahoo Finance]

The new moats [Greylock]

Staying competitive as the world changes [Collaborative Fund]

A look at Seritage Growth Properties [Barrons]

Profile of Fidelity's Will Danoff [FT]

How Trump's pick for top Antitrust cop may shape competition [NYTimes]

Big name food brands lose battle of the grocery aisle [WSJ]

Thoughts on retailer L Brands [Intrinsic Investing]

Is the lingerie market on the verge of another disruption? (possible NSFW image) [Business of Fashion]

Amazon strategy teardown: building new business pillars [CB Insights]

UnderArmour tripped up in its run to become the world's next sneaker giant [Qz]

CEO pay is out of control [Fortune]

Apple's China problem [Stratechery]

With $6.2 billion spectrum spree, DISH's Charlie Ergen buys himself options [Bloomberg]

Can Facebook fix its own worst bug? [NYTimes]

Dyson is the Apple of Appliances [NYTimes]

Elon Musk's 2017 TED talk interview [YouTube]

Lee Ainslie's Maverick Capital Sells Entire Under Armour (UA) Stake - 13G Filing

In a 13G filing made with the SEC after the close today, hedge fund Maverick Capital has sold off their entire position in Under Armour (UA).  Maverick Capital is a $10 billion hedge fund ran by the notoriously great stock picker Lee Ainslie.  The filing shows that the transactions were completed as of October 31st, 2008.  Previously, Maverick owned 3,629,460 shares, around a 10% stake in the company, as was detailed in their last 13F filing.

Maverick's performance this year has definitely been sub-par by their standards.  Their Maverick Fund was -6.34% for October and is now -26.47% year-to-date.  You can check out their most recent investor letter here and learn more about Maverick and their portfolio holdings here.  Their updated portfolio will soon be available with the release of the next 13F filing with the SEC here in the next week or two.  So, make sure you keep an eye out at MarketFolly.com for that.  It will be interesting to see what else Maverick has been busy doing besides dumping all of their UA.

Taken from Google Finance, Under Armour (UA) is "engaged in the design, development, marketing and distribution of branded performance products for men, women and youth. The Company designs and sells an offering of apparel and accessories that utilize a variety of synthetic microfiber fabrications. Its active wear and sports apparel, footwear and accessories are designed to wick perspiration away from the skin, help regulate body temperature, enhance comfort and mobility and improve performance regardless of weather condition."