Entering text into the input field will update the search result below

Polaris Inc.: Take The Money And Run

Jun. 03, 2020 1:44 PM ETPolaris Inc. (PII)16 Comments
Patrick Doyle profile picture
Patrick Doyle


  • I think the case of Polaris Inc. is interesting because it demonstrates the fact that a challenged company can be a great investment if the price is right.
  • The problem in this case is that the stock is now much too expensive relative to the fundamentals here, and for that reason I recommend selling now.
  • I think the company has the resources to (barely) cover obligations over the next few years. 2023 will be a challenge.

Since publishing my bullish piece on Polaris Inc. (NYSE:PII) just over two months ago, the shares are up an eye watering 89% against an 18% for the S&P 500. I think I need to look in on this name again for two reasons. First, the risks inherent in a stock are much different when it's trading at $89 than when it is trading at $47. Second, the company has released financials since I wrote about them, so I thought I'd check in on the name. Also, I should update investors on the options trade I recommended in my previous article. I'll come right to the point. I think the market previously overreacted on the downside and is now overreacting on the upside. For this reason, I am taking the money and running, and I recommend that other investors do the same.

I think the case of Polaris is interesting for two reasons. First, writing about it allows me to engage in the financial bloggers' favorite pastime of cherry picking successes and then bragging about them. Second, and far more importantly, it reveals something about the risks associated with what I call "narrative investing." The idea here is that very plausible sounding stories can get us into trouble. To use Polaris as an example, when I wrote a bullish piece about the company at the height (depth?) of market despondency, everyone "just knew" that a stock like Polaris was doomed to languish for years. It's not as if the people who disagreed with my first article were stupid. They had very sound, well reasoned arguments for avoiding the name. In my opinion, it's just that those plausible sounding stories weren't sufficiently anchored in the data. I think we can learn a few things from this experience. First, I've revealed yet another odious personal trait, namely a tendency toward braggartism. Second, we investors need to go past plausible sounding stories and start to rely more heavily on data

ChartData by YCharts

This article was written by

Patrick Doyle profile picture
I'm a quant investment newsletter writer who marries fundamental analysis with the latest research in momentum. Over the past few years, I’ve developed a piece of software that helps me track the level of optimism and pessimism embedded in stock price. I seek to challenge the assumptions embedded in price by profitably exploiting the disconnect between what the market thinks and what is a likely outcome. I invest in those companies that have a greater than average chance of giving us all a surprise in the next few months.

Analyst’s Disclosure: I am/we are long PII. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Although I'm currently long, I'll be selling this stock and buying back the puts on this stock over the next week.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

Recommended For You

To ensure this doesn’t happen in the future, please enable Javascript and cookies in your browser.
Is this happening to you frequently? Please report it on our feedback forum.
If you have an ad-blocker enabled you may be blocked from proceeding. Please disable your ad-blocker and refresh.