The Michaels Companies Inc (MIK) – Closing Long Position – up 16% vs. S&P up 41%
We made The Michaels Companies (MIK: $22/share) a Long Idea on June 27, 2018 and reiterated it on September 11, 2019. At the time of each report, MIK received a Very Attractive rating. Our long thesis focused on the competitive advantage physical stores provide given the high-touch nature of the arts & crafts industry and increased demand in the industry driven by apps such as Pinterest (PINS), Instagram, and Etsy (ETSY).
This report, along with all of our research, leverages our more reliable fundamental data to get the truth about earnings, as shown in the Journal of Financial Economics paper, “Core Earnings: New Data and Evidence.”
During the 2.5+ year holding period, MIK underperformed as a long position from the date of our original report, rising 16% compared to a 41% gain for the S&P 500. Since we reiterated the idea in September 2019, MIK increased 124% while the S&P is up 26%.
After bottoming out at ~$1.50/share in March 2020, the stock rallied to $15/share before Apollo Global announced it was taking Michaels private at $22/share. As a result of the pending acquisition, we are closing this long position.
Figure 1: MIK vs. S&P 500 – Price Return – Underperforming Long Idea
Sources: New Constructs, LLC and company filings
Note: Gain/Decline performance analysis excludes transaction costs and dividends.
This article originally published on March 5, 2021.
Disclosure: David Trainer, Kyle Guske II, and Matt Shuler receive no compensation to write about any specific stock, style, or theme.
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