the big issue here is the potential for a recession which is high considering a) credit spreads b) construction slow down both US domestic and Intl c) international manufacturing (US has little manufacturing. The other outlier is inflation. I run a script that gives me some high level guidance on market conditions. Current recommendation is caution:
Fair point, I sometimes migrate up to midcaps, but Dicks is a journey too far for me. Still a valuable comp to consider, but I don't want to blow sunshine up skirts because often larger companies trade for very different multiples and the gap won't close.
the big issue here is the potential for a recession which is high considering a) credit spreads b) construction slow down both US domestic and Intl c) international manufacturing (US has little manufacturing. The other outlier is inflation. I run a script that gives me some high level guidance on market conditions. Current recommendation is caution:
Sector Risk Scores:
US Manufacturing: 36.0% risk score
Asian Manufacturing: 52.5% risk score
US Construction: 56.0% risk score
Global Construction: 57.3% risk score
Credit Markets: 0.0% risk score
Credit Market Details:
HY-IG Credit Spread:
Current Z-Score: -1.69
3-Month Change: -7.8%
Volatility: 0.01
Recession Risk Analysis
----------------------
Risk Level: High
Probability Range: 60-75%
Reasoning: Multiple sectors showing significant stress
Historical Context: Similar to pre-recession conditions
Timing Analysis
--------------
Credit Markets:
Typical Lag: 3-6 months
Reliability: High
Current Signal: Normal
Asian Manufacturing:
Typical Lag: 6-9 months
Reliability: High
Current Signal: Leading indicator
Global Construction:
Typical Lag: 9-12 months
Reliability: Medium
Current Signal: Leading indicator
US Manufacturing:
Typical Lag: 3-6 months
Reliability: Medium
Current Signal: Normal
US Construction:
Typical Lag: 12-18 months
Reliability: Low (tends to lag)
Current Signal: Leading indicator
How would you position based on this, which sectors? Or just cash and delever?
Why Academy as a comp but not Dicks?
Fair point, I sometimes migrate up to midcaps, but Dicks is a journey too far for me. Still a valuable comp to consider, but I don't want to blow sunshine up skirts because often larger companies trade for very different multiples and the gap won't close.
looks like a public leveraged buyout setup. deleverage and all the upside goes to the equity holders?
Yeah, I think when revenues and income flip positive, all the quantitative strategies will bid it up to 0.5x sales again. Probably a 2 year process.