Speaking to Benzinga, Sarhan Capital CEO Adam Sarhan discussed Lumber Liquidators Holdings Inc LL 10.42% ahead of its Thursday conference call.
Sarhan said that Lumber Liquidators “is a broken stock” and that it was “extremely important for investors to remain cognizant of the fact that LL is in a bear market.”
Looking at the company’s recent performance, Sarhan pointed out that the stock had “lost more than 56 percent of its value in the last 2.5 weeks” which signaled that, rather than retail investors, “large institutions are aggressively selling, not buying the stock.”
“The company entered a perfect bearish storm right before the 60 Minutes story aired. The story shattered confidence and destroyed the company’s reputation,” according to Sarhan, and that in the 24/7 news cycle “it takes years to build a reputation and seconds to shatter it.”
Sarhan indicated that after such a quick implosion, it would take many quarters, “if not years” for the stock to recover and while there may be exceptions, the “vast majority of the stocks that suffer this type of a beating are usually dead money for a very long time.”
The risk was also “off the charts because the story can get much worse” with the potential for lawsuits or other cases of hazardous components in Sarhan’s view.
“The stock has a lot of work to do before I will be interested in it again,” Sarhan concluded.
Lumber Liquidators closed Wednesday at $32.73, up 10.65 percent.