ASOS - Revisited and taking a Creditor's Perspective

Since we reversed our position, longing ASOS' equity, our position is down 50% compelling us to revisit our thesis, this time looking at the situation from a creditor perspective.

We give high-level perspectives on how its capital structure has evolved as the prospects of the business deteriorated, and try and read behind the lines of management's commentary on the firm's debt structure.

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ASOS's Consumer Conundrum

As of 29/04/2022, we reaffirmed our short recommendation on ASOS. With consumer confidence at historical lows and inflation rampant, ASOS's business model and value proposition couldn't be more ill-suited for current operating conditions. We believe that this isn't reflected in the company's stock price due to little to no coverage of potentially severe discounting across the fast fashion retail sector. 

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Result: See "ASOS Troubles".

Buckle Up Buckaroo!

As of 17/01/2022, we opened a long position in CMC Markets. We believed that the stock price was reflecting an overly quiet time in the markets with regards to volatility. In our view, CMC's stock price failed to acknowledge that the Fed, and other central banks, would become aggressively Hawkish in an attempt to abate runaway inflation. With markets trading at exuberant levels, we concluded that the impending aggressive interest rate hikes would induce significant market volatility, from which, CMC would benefit.

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ASOS Troubles

As of 27/08/2021, we advised shorting ASOS. As part of our "Boots on The Ground" investigations, we gathered raw fundamental data about ASOS's customers, specifically their sentiment towards the company and spending behaviour. From our research, we found that ASOS's most threatening competitor is the resale market. We also found that environmental concerns had a material impact on consumers' spending behaviour; this combined with the threat of the resale market led us to be pessimistic about ASOS's outlook and valuation.

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Result: +79.3% gain exiting and reversing the position, 29/01/23.

"The dollar is our currency, but it is your problem."

As of 11/12/2022, we took a bearish perspective on the dollar as we expected other CBs to catch up with the Fed in their rate hikes, hence compressing the relative value gap between the reserve currency and other currencies around the globe. 

We took a long position on GBP/USD with a price target of $1.2868 by mid-2023.

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