Macro Tsimmis

intelligently hedged investment

Cabela’s (CAB) update

Posted by intelledgement on Sun, 12 Oct 08

Our retail and direct marketing provider of outdoors merchandise, Cabela’s (CAB) signaled that they are feeling the pinch this week with the announcement of a 10% reduction in their headquarters staff on Tuesday. “This workforce reduction is an effort to reduce costs and improve efficiencies,” stated Dennis Highby, Cabela’s CEO. “While this was a difficult and challenging decision, I believe it was necessary given the macroeconomic environment we are facing.”

The market reacted negatively to the announcement as the stock closed down 3% on Tuesday. By the same token, it has been down 13 out of 15 trading days since we bought it on 19 September, and overall is now—as of Friday’s close—down 35% in three weeks. This from a profitable company that has done nothing but set new Y-O-Y quarterly sales records for the past 17 consecutive quarters! The Street is evidently failing to appreciate our theory that if The World As We Know It ends here due to the meltdown of all the big banks and collapse of all currencies, a company that sells guns and fishing poles is going to be sitting pretty. Well, any portfolio that includes investments in the stocks of individual companies is undertaking a higher level of speculative risk and this is a good example.

Fortunately, stock prices of the three retail-oriented companies which we sold short (BBY-MA-WMT) have also declined sharply—albeit not quite so sharply—and overall, we are ahead on our retailing stock speculations.

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