RH (RH-N)

It reports Wednesday. It's a retail stock, a tough sector. It's fallen with the sector. Wait for the bounce, but in this market it feels like a bet and not an investment.

Has doubled since last June's lows, but weirdly without a fundamental change in its business, like a beat and raise quarter, just some raised guidance. The CEO did buy a lot of shares last June.

Demand was up 10% in July and 12% in August. Sure, you may not want to buy a stock that jumped 25% in one day, but anything related to housing (and falling interest rates) is doing well. He expects a housing boom.

They keep posting disappointing numbers and after the latest, the stock dropped 17% today. Is the CEO a visionary or driving RH to ruin? Pre-2021, RH was a juggernaut as they build luxurious stores including dining around the world at their stores. Also, they're moving into real estates, including spas and hotels. They're spending a fortune to build luxurious experiences. But their core business of luxury furnishings is struggling. They've borrowed money to fund this expansion, however, they spent a big chunk of that money to buyback shares just as interest rates rose and the housing market tightened. Can rates fall fast enough to save RH? Doesn't think so. The outlook is dwindling, but the CEO keeps spending.

The market made a mistake in selling it after a downbeat conference call, because RH bought back 17% of shares in just this quarter (23% so far this year). This is one of the biggest single-quarter buybacks he ever heard of. Buybacks shrink EPS, remember, and shows confidence from management

High quality company with excellent management team.
Hit peak revenue during Covid-19 pandemic.
Current share price presenting buying opportunity.
Expecting revenue & margins to grow.
A good long term investment over 5-10 years.

They report Thursday. Likes them, but they've been issuing disappointing numbers and their accounting issues don't inspire confidence.