How Xuhua Zhou brought down Lumber Liquidators and profited by it
How a 25-Year-Old Sparked Plunge at Lumber Liquidators
Excerpt:
Lumber Liquidators Holdings Inc.’s stock plunge over the past week, fueled by allegations of excessive formaldehyde in its flooring, can be traced back to a blog post from an obscure 25-year-old short seller. Xuhua Zhou, who had dropped out of UCLA’s doctoral program in finance and become an individual investor, took an interest in Lumber Liquidators about two years ago. After seeing a surge in the company’s gross profit margin, Zhou learned that it sourced some products from China. That raised his suspicions that safety might have been skirted in pursuit of lower costs, he said in an interview. Zhou, who was born and raised in China, already had experience researching suppliers in the country, so he began investigating. His digging ultimately led to lawsuits, a “60 Minutes” report and accolades from the well-known short seller Whitney Tilson, who also bet against Lumber Liquidators.Comment: Quote above from Yahoo for LL. Store image from Wiki. The 60 Minutes expose is stunning.
Suggestion: If you want wood don't go with a wood laminate. We have real hardwood in our kitchen.
ReplyDeleteOur last house had real wood in the L/R, D/R and kitchen.
Tile works best in entry ways, hall ways and bathrooms.
More on the LL drama: Lumber Liquidators: Cutting corners on the American Dream
Their price was too good to be true!
A call to the local Home Depot (HD) in Peoria, Illinois found that the cost of installing new wood flooring in a 1,000 sq. foot home costs a minimum of $6760 while the local Lumber Liquidators will do the same job for just $2740.
Stock under pressure: Lumber Liquidators Holdings, Inc. (LL) could be a stock to avoid from a technical perspective, as the firm is seeing unfavorable trends on the moving average crossover front:
ReplyDeleteThis has already started to take place, as the stock has moved lower by 48.9% in the past four weeks. And with the recent moving average crossover, investors have to think that more unfavorable trading is ahead for LL stock.
If that wasn’t enough, Lumber Liquidators isn’t looking too great from an earnings estimate revision perspective either. It appears as though many analysts have been reducing their earnings expectations for the stock lately, which is usually not a good sign of things to come.