Tailored Brands (TLRD), a top Q4 holding of Michael Burry’s Scion Hedge Fund, spiked higher Tuesday after a corporate insider disclosed buying $100K of the beaten-down stock. As of mid-day, TLRD was trading at $8.20, up 6.40% on the day, but down 43% year-to-date. The stock has lost 3/4 of its value since May of last year.
Legendary investor Michael Burry, profiled in the book and movie The Big Short, held 638,000 shares of TLRD in his hedge fund Scion Asset Management at the end of 2018. It was Scion’s fifth largest position as of Q4’s close. WhaleWisdom estimates the fund’s cost to be $13.64.
Since making hundreds of millions for himself and clients shorting sub-prime securities during the financial crisis, the reclusive Burry has focused on deep-value stocks in his hedge fund.
Michael Burry’s worst performing position YTD from Scion’s Q4 portfolio is TLRD
While most of Michael Burry’s long picks in Scion have done well year-to-date, Tailored Brands has been a notable exception. The stock hit three-year lows of $7.35 on Friday — the lowest level since Men’s Wearhouse converted into the holding company structure of Tailored Brands in 2016. The company’s founder George (“You’ll like the way you look –I guarantee it”) Zimmer was fired in 2013 after an acrimonious power struggle.
Michael Burry’s Scion Capital Q4 holdings with YTD change
|Stock||Symbol||Shares Held||Market Value||% of Portfolio||Ranking||YTD Chnge|
|Corepoint Lodging inc||CPLG||904,984||11,086,000||10.71%||1||2.45%|
|Alexander & Baldwin Holdings inc||ALEX||500,356||9,197,000||8.88%||2||31.07%|
|Five Point holdings llc||FPH||1,323,626||9,186,000||8.87%||3||19.60%|
|Walt Disney co. (the)||DIS||80,000||8,772,000||8.47%||4||20.42%|
|Tailored brands inc||TLRD||638,005||8,702,000||8.41%||5||-43.26%|
|Alphabet inc. class a||GOOGL||8,000||8,360,000||8.08%||7||17.38%|
|Cliffs Natural Resources inc.||CLF||1,041,934||8,012,000||7.74%||8||33.16%|
|Gamestop corp. class a||GME||536,862||6,775,000||6.54%||9||-29.16%|
|Sportsmans warehouse holdings inc||SPWH||1,217,869||5,334,000||5.15%||10||11.19%|
|Western digital corp||WDC||100,000||3,697,000||3.57%||12||40.28%|
|Altaba inc. (yahoo)||AABA||58,225||3,374,000||3.26%||13||28.36%|
|Mohawk industries inc.||MHK||18,809||2,200,000||2.13%||16||12.50%|
Q4 was another downer for Tailored Brands
In March, Tailored Brands reported a loss of 28 cents for Q4 2018. Adjusted revenue of $770 million was well below analysts estimates, and declined 10% year-over-year. The company cut its outlook for the first quarter to $0.10 to $0.15, significantly below analyst forecasts. Tailored Brands said that same-store sales at both Men’s Wearhouse and JoS A Bank are expected to fall 3% to 5% due to “significant headwinds” like the late Easter holiday, foreign exchange impacts and current business trends.
After the Q4 report, B.Riley FBR analyst Susan Anderson lowered her rating on Tailored Brands stock from Buy to Neutral, noting sharp same-store sales declines at Men’s Wearhouse and Jos A. Bank. In a note, Anderson wrote that the drop in sales “was partially due to misalignment in product mix with the customer’s expectations, particularly in terms of a lower penetration of business casual options.” Barrons ran a story titled: “Tailored Brands Stock Is Getting Hammered Because Now Every Day Is Casual Friday.”
As TLRD tanked, the Brand President of Men’s Warehouse increased her holdings by 181%
But yesterday, Carrie Ann Ask, Brand President of Men’s Wearhouse and Moores tuxedos, filed a Form 4 reporting the purchase of 13,500 shares of TLRD at $7.41 on April 12. Though not large in dollar terms, the buy increased Ask’s holdings by 181% — from 7,460 to 20,960 shares. Since last October, Ask has served as Brand President of Men’s Wearhouse and tuxedo retailer subsidiary Moores. Ask joined TLRD last October from NIKE where she was a VP with Converse.
Why is the Brand President of Men’s Wearhouse buying when the investment world sees a Tailored Brands bankruptcy as a strong possibility? Hard to say. But insiders are contrarians, and likely Ask views the recent weakness as overdone. With a yield of 9.0%, a price-to-sales ratio of 0.12, and a forward P/E of under 4X, the shares do look cheap.
We have no way of knowing if Michael Burry has added or sold shares of Tailored Brands since Q4 end. For that we’ll have to wait for Q1’s 13F holdings to be released mid-May. However, if a TLRD insider see’s value at current levels, it’s a good bet that Burry does too.
Disclaimer: Do not construe anything written in this post or this blog in its entirety as a recommendation, research, or an offer to buy or sell any securities. Everything in this blog is meant for educational and informational purposes only. Do your own research before investing and don’t risk more than you can afford to lose. This article expresses my own opinions, and I am not receiving compensation for it (other than from WhaleWisdom). I do not have a business relationship with any company whose stock is mentioned in this article. I or my associates may hold positions in the stocks discussed.