CLOSING: SWATCH #2

Closing half the position 17.50%

CFR numbers this morning were poor. Not only was it a sales miss, but the miss was in the high margin Asian region which will hit the bottom line to a greater degree

The bull case has largey been driven on the FX headwind of 2014 becoming a tailwind, adding as much as 10% to EBIT alone without stabilisation of operational trends

That tailwind has disappeared today. As Swatch CEO Nick Hayek says “words fail me” as Swiss National Bank abandons franc cap. “Today’s SNB action is a tsunami, for the export industry and for tourism, and finally for the entire country”

The implications will be far reaching, translational and transactional, so the move lower for UHR will be greater than the FX move itself (as it was the last time the CHF moved aggressively in July/Aug 2011)

We have been fortunate today. Both times we have shorted UHR it has been good to us (+11.3%/+17.5%) and we are locking in half of our gains since the trade now becomes as much FX driven as it is operational and we have no edge in FX. But for the operational reasons listed above we are happy to stay short half a position

 

Short SWATCH = Switzerland Nov. Watch Exports Fell 4.4%

Thursday • 18 December 2014 • 07:56

Switzerland Nov. Watch Exports Fell 4.4%. Poor numbers and more confirmation of our bear case

Numbers still need to come down as loved by analysts. The iWatch still has not arrived

UBS think that 24m iWatches will be sold next year vs 28mn total exports from Swiss watch industry in 2013

Stay Short

 

Short SWATCH..TAG HEUER reacting to iWatch Threat

Wednesday • 17 December 2014 • 07:53

Tag Heuer enlists partners in smartwatch plan and may make acquisitions (Reuters article)

“Smartwatches represent a challenge to the Swiss watch industry that is comparable to the appearance of quartz technology. We cannot ignore this tsunami that is coming closer,” Semon said

They are all finally waking up to the threat. They have been in denial so far. iWatch is not even here and analysts are still in love with Swatch and numbers are too high

Stay short sell any rallies

 

Reopening a short

Tuesday • 16 December 2014 • 07:46

2014 EBIT consensus is too high at CHF1.97bn – could come down to c.CHF1.75 according to Mainfirst

One of our original arguments was that consensus was too high

Analysts still love them and expect organic growth. I think they are dreaming

Apple watch is not far away and will have a much bigger impact than most expect

UBS think that 24m iWatches will be sold next year vs 28mn total exports from Swiss watch industry in 2013

Tech and iWatch is the future

Looking to see them back at this years lows in the next 3 months

See original idea from September