27% profit every 20 days?
This is what Nic Chahine averages with his option buys. Not selling covered calls or spreads… BUYING options. Most traders don’t even have a winning percentage of 27% buying options. He has an 83% win rate. Here’s how he does it.
- In a new article, Whitney Tilson reveals he is still aggressively short Lumber Liquidators Holdings Inc (NYSE: LL).
- After speaking to two former installers, Tilson calls the company “rotten to the core.”
- Lumber Liquidators’ stock has fallen more than 80 percent from its 52-week highs but has shown little reaction to Tilson’s revelations so far.
On Monday, Whitney Tilson, founder and Managing Partner of Kase Capital Management, published a new article on Seeking Alpha focusing on Lumber Liquidators. Despite the huge plunge in the company’s share price, Tilson believes that the stock has plenty of room to the downside and has maintained a large portion of his short position.
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Related Link: Lumber Liquidators Still In a State Of Flux
Condemning Stories
The major focus of Tilson's article is interviews he conducted with two former Lumber Liquidators installers, who reveal that the company has had major issues with many of its product lines and has handled customer complaints very poorly.
The first installer worked for Lumber Liquidators from 2011 to 2014 and said that the company pushed manufacturers to produce extremely low-cost and low-quality flooring materials with high water content that caused floors to contract and buckle over time.
“The manufacturer is supposed to season the product for months: take the rough cut, then put in a big room or an oven to decrease the moisture content down to 6%, then put it through the finishing process. But Lumber Liquidators pushed its manufacturers so hard that all of the company's products were coming in wet: 20-28% moisture content,” he explained.
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A second installer confirmed the horror stories about Lumber Liquidators flooring, but added that customers’ complaints were often blown off or deflected by inspectors with questionable motives.
“The inspectors, many of whom are low quality and unscrupulous, side with whoever pays them,” he told Tilson.
Staying Short
Tilson feels so strongly that Lumber Liquidators has more downside remaining that he is maintaining a large portion of his short position even after the share price has declined more than 80 percent. “Everything I've heard, read and observed leads me to believe that Lumber Liquidators is rotten to the core,” he wrote.
Market Shrugs It Off
Lumber Liquidators may have fallen more than 80 percent from its highs less than a year ago, but the market seems to be shrugging off Tilson’s latest revelations. The stock was trading mostly flat early in Monday's session.
Disclosure: the author holds no position in the stocks mentioned.
Image Credit: By Dwight Burdette (Own work) [CC BY 3.0], via Wikimedia Commons
27% profit every 20 days?
This is what Nic Chahine averages with his option buys. Not selling covered calls or spreads… BUYING options. Most traders don’t even have a winning percentage of 27% buying options. He has an 83% win rate. Here’s how he does it.