Credit Suisse Downgrades Retail, As Hedge Funds Prepare To Profit

Is the Retailers Apocalypse upon us? Not just Sears (SHLD) is in trouble some on the sell side and hedge fund community believe.

Credit Suisse has downgraded retail (within the consumer discretionary sector), and consumer durables and apparel to market weight, saying several metrics were at their lowest since the 2008 global financial crisis. The sectors had been rated overweight on account of “deep valuation” appeal.

The downgrade comes days after Sears (SHLD) Holdings announced bleak annual results and expressed doubts about its "ability to continue as a going concern".

In a note out this morning,  Evercore ISI opines the following regarding Sears:

2016 was another year of very poor operational results offset by assets sales. While the cash burn rate is improving as the company shrinks, they remain very far from sustainable levels of loss and require external liquidity. Given the very weak store base, continued comp declines, anemic sales productivity, and continued share loss in most major categories, SHLD does not appear well positioned for 2017.

As far back as 2015, Evercore predicted liquidation as a "base case" for Sears

Others have proclaimed a " Retailers Apocalypse " as many brick and mortars such as GameStop being the latest come under increasing pressure from Amazon.

Speculation also raged about mall-related debt likely to be the next big short.

In recent weeks, hedge funds such as Alder Hill Management have ramped up shorts against commercial mortgage-backed securities, while Deutsche Bank and Morgan Stanley have recommended buying credit protection on the BBB- tranche of CMBS, according to Bloomberg .


This content is exclusively for paying members. Sign up here

If you are subscribed and having an account error please clear cache and cookies if that does not work email support@valuewalk.com or click chat

Saved Articles

The Life and Career of Charlie Munger

Charlie is more than just Warren Buffett’s friend and Berkshire Hathaway’s Vice Chairman – Buffett has actually credited him with redefining how he looks at investing. Now you can learn from Charlie firsthand via this incredible ebook and over a dozen other famous investor studies by signing up below:

  • Learn from the best and forever change your investing perspective
  • One incredible tidbit of knowledge after another in the page-turning masterpiece of a book
  • Discover the secrets to Charlie’s success and how to apply it to your investing
Never Miss A Story!
Subscribe to ValueWalk Newsletter. We respect your privacy.

Are you an intelligent investor?

ValueWalkPremium is a website and newsletter for smart investors like yourself. We focus on the latest hedge fund industry news much of which is not in the public domain and obtained via our sources.

We also have 10 years of resources on how to use this information to better your investment process.

Sign up for  today for only a few dollars a day and get a 3 day no obligation trial with a targeted 20% discount coupon code.

Cancel anytime during trial and you are never charged.

Limited time offer: For first 50 subscribers