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Originally Posted by logo
I’ve been going very aggressive on COTY in $12 and some $10 calls Jan 2023. Going to give those a few more months before rolling into a lower strike and maybe 2024. Just feels so undervalued in the cosmetics industry and has been basing in the $7.50-9.50 range for the past 8 months, so I’m looking to see it breakout from there. The past few months saw some dips but in so doing we unloaded debt and improved our balance sheet tremendously. Looking at today vs March when we were at the same price point, there’s no question we are in better shape today both as a business and with more certainty of what the future looks like - back then vaccines were just starting. I think that big moves could happen with investor day and ER coming up.
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Totally agree with you brother and they have been cleaning up their balance sheet by reducing debt. I was speaking with an analyst who covers them and she noted that the bigger issue is KKR still has a massive stake in them with shares at an incredibly low cost basis. She noted that is why when we hit 9.50-10 we see selling pressure as they unload those shares. Not sure how much longer that is sustainable and one would pragmatically think they would let the stock run more to make more money.
I know we have spent a lot of time in this space researching, when you have a free minute and if you are open to it, I would love for you to take a look at YSG and let me know your thoughts. They are the COTY equivalent in China and number one in many categories with great growth and margin, although still losing money albeit getting closer to profitability. Bigger issue is it being a chinese stock which the headlines with Chinese stocks caused the price decline but to move from $24 to $3 seems quite oversold. Not like Xi is going to ban makeup and his current initiatives have nothing to do with this industry. Let me know your thoughts, stock is struggling to find a bottom but could pose for some potential great upside. I'll make a post with a few slides from their investor deck next week but I am really taking a deep dive here.