Mueller Industries (MLI) short, mcap=$4.2bn, price $72.89 vs $61.00

MLI short pitch:
– Compelling opportunity to short a secularly challenged pandemic beneficiary.
– Manufacturer of copper tubes and fittings for the plumbing and HVAC end-markets at 35x pre-pandemic earnings.
– MLI is significantly overearning and faces an imminent deterioration in market structure, a resurgence in competitive imports from East Asia, and cyclically declining demand, amplified by excess distributor inventories.
– Current EPS is 5x higher compared to pre-pandemic levels.
– Set to revert to or below pre-pandemic levels by 2024.

MLI valuation:
– Trades today at ~35x pre-pandemic earnings.
– 2024 EPS set to decline to $0.75-$1.75 from the current $10/share.
– At 13x multiple on these normalized earnings, would be $25-$39 stock.

Exp. gain: 37%-59%

Full write-up (free guest account required):