Daniel W

Why We’re Short Hanesbrands

By the way, the above was written because this is the sort of stuff that matters, right or wrong.

Put another way: whether your conspiracy theory about Greenberg is correct or not doesn't matter. The truth or not of what he writes is.

Whether shorts have an interest in seeing shares they've sold go lower is not primarily important. Why they've gone short, and the correctness or not of that reason, is.

Talk about secret dealings between hedge funds and journalists is not just stupid--it's a waste of time.

Why We’re Short Hanesbrands

Has Greenberg's analysis on companies been right--or wrong? Is his analysis on HanesBrands good--or bad?

Tilson correctly highlights Greenberg's past and recent work because it has consistently been right on the mark, and that's a very good thing (whether you don't want to lose money in a bad stock or want to make money going short the same).

I read Greenberg's analysis and thought it was good. I've also read the street's analysis and consider it too optimistic.

*They downplay the low quality of earnings that Greenberg & Meritz pointed out as well as the inroads that their competitors are making.

*They don't think earnings will suffer--either due to lower customer spending or increased cotton prices--as they see the company being able to offset this through the paydown of debt.

*They don't place enough weight on risk factors--particularly here of bringing new production capacity online without problems and the company's huge debt position. The effect of problems in the first should be obvious, especially as they ripple throughout the system. The effects of the latter should too, and here they would be magnified should the Fed start raising rates at some point over the next year to deal with inflation.

*Finally, I don't see why anyone would want to pay 14-17x earnings for an overly-indebted company which suffers from a higher RMB, higher cotton prices, higher rates on US debt, and lower consumer spending--particularly with the risks on the production side.

Based partly on the Greenberg & Meritz report I too went short this company. Haven't shorted a lot, especially relative to my portfolio, as I'm waiting to see what management will do with this next earnings release.