Here’s Why You Should Go Short in Leslie’s (LESL) - InvestingChannel

Here’s Why You Should Go Short in Leslie’s (LESL)

Jackson Peak Capital, an investment management firm, released its third quarter 2023 investor letter, a copy of which can be downloaded here. Jackson Peak performed exceptionally well in Q3, delivering a robust +11.8% return. Despite the challenging market conditions, Jackson Peak’s alternative, long-short investment strategy proved successful, securing notable wins in each segment of the portfolio—core longs, special situations, and alpha shorts. Additionally, the portfolio received a smaller yet beneficial boost from reducing net exposure and implementing macro hedges in anticipation of an increase in long-term interest rates, a move that paid off as long-term interest rates rose and equity indices declined. Take a moment to review the fund’s top 5 holdings to gain insights into their primary investment choices for 2023.

In its Q3 2023 investor letter, Jackson Peak Capital mentioned Leslie’s, Inc. (NASDAQ:LESL) and explained its insights for the company. Leslie’s, Inc. (NASDAQ:LESL) is a Phoenix, Arizona-based swimming pool supplies and related products provider with a $1.05 billion market capitalization. Leslie’s, Inc. (NASDAQ:LESL) delivered a -52.99% return since the beginning of the year, while its 12-month returns are down by -62.87%. The stock closed at $5.74 per share on November 17, 2023.

Here is what Jackson Peak Capital has to say about Leslie’s, Inc. (NASDAQ:LESL) in its Q3 2023 investor letter:

“A short position in Leslie’s (LESL), a retailer of swimming pool supplies, contributed 1.3% to the portfolio. Our view was that LESL benefitted from two extraordinary events, a surge in pool construction during COVID and a spike in chlorine prices, that temporarily provided a significant boost to its business, and the market was too optimistic in extrapolating those results into the future. Additionally, the business is significantly leveraged. These issues came to a head in July when the company preannounced Q3 results that missed expectations materially, lowered forward guidance dramatically, and announced a CFO transition. The stock fell 41% the following day.”

A technician in safety gear inspecting a pool automated system.

Our calculations show that Leslie’s, Inc. (NASDAQ:LESL) does not belong on our list of the 30 Most Popular Stocks Among Hedge Funds. We also mentioned Leslie’s, Inc. (NASDAQ:LESL) in another article. Leslie’s, Inc. (NASDAQ:LESL) was in 18 hedge fund portfolios at the end of the second quarter of 2023, compared to 22 funds in the previous quarter. Leslie’s, Inc. (NASDAQ:LESL) delivered a -13.29% return in the past 3 months. You can find other investor letters from hedge funds and prominent investors on our hedge fund investor letters Q3 2023 page.

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Disclosure: None. This article is originally published at Insider Monkey.

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