Hanesbrands' Bear Case Is Overstated

About: Hanesbrands Inc. (HBI)
by: Praveen Chawla
This article is exclusive for subscribers.
Praveen Chawla
Long only, momentum, Growth

Bears cite Hanesbrands' debt load and lack of tangible equity as justification for avoiding or shorting the shares. Over 20% of the float is shorted.

Hanesbrands generates huge amount of free cash flow. A large part of the free cash flow is earmarked for deleveraging. Hanesbrands has been reducing its cost of debt.

After a period of disruption in retail, Hanesbrands sales and EBITDA growth is stabilizing as the company adjusts to the new landscape. Revenues are increasing at a decent clip.

I am unconvinced by the bear case that Hanesbrands is being disrupted by Amazon. I believe Hanesbrands provides compelling value.

However, the fact is that the stock has been in a downtrend for nearly five years now. The stock is down >50% from it peak (while the S&P 500 is up ~50% during this time). Is Hanesbrands a value trap?

It's safe to say that Hanesbrands (HBI) is unlikely to win a popularity contest among investors. Since peaking in 2015, the stock has been in a relentless downward channel. Currently short % of