With market volatility and worries about the commodity downturn, China’s economic weakness and rising interest rates weighing on investors, now may be a good time to opt for the relative safety of pair trades as a hedge against a bearish stock market turn.
In a new report, Morgan Stanley analyst Jay Sole discusses five apparel pair trades the firm recommends this year.
“We believe multiples will generally rise on both a relative and absolute basis, but in case they don’t and 2016 is like 2015, 2008 or 2000, we like pair trades,” Sole explains.
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The pair trades that Sole includes in the report were identified based on differences in EPS versus consensus and valuation.
Here are the five trades he likes for 2016:
1. Long: Nike Inc NKE
Short: Under Armour Inc UA
2. Long: Hanesbrands Inc. HBI
Short: VF Corp VFC
3. Long: Sketchers USA Inc SKX
Short: Steven Maddedn, Ltd SHOO
4. Long: Genesco Inc. GCO
Short: DSW Inc. DSW
5. Long: Childrens Place Inc PLCE
Short: Columbia Sportswear Company COLM
Disclosure: the author has no position in the stocks mentioned.
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