Lumber Liquidators (NYSE:LL)

CAPS Rating: 3 out of 5

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Member Avatar TMF1000 (99.75) Submitted: 5/27/2015 1:59:05 PM : Outperform Start Price: $21.79 LL Score: -1.43

LL Price placed on CAPS $21.79

The price could easily go down much more for many reasons that I have discussed in this post. I certainly don't have any real answers. But I don't fear formaldehyde any more than I do drinking an energy drink or operating my laser printer in a room with fair ventilation. I have great respect for the negative health effects of them all. But I use ventilation, simply airing out the house and keeping things as well dusted as possible, rather than tossing my laser printer. In my opinion, my use of a laser printer is far more dangerous than the worse of laminated floors sources from China. And I still don't know for sure if used correctly, if those floors are dangerous. It is my understanding the core of the laminates is sealed during the construction process, so much of the formaldehyde would be contained. What slowly leaks out would break down in sunlight, and could be vented out of the home, by opening windows occasionally, which I practice every chance I get. As time passes less formaldehyde is released.

From an independent source, apparently even the use of an air conditioner slows the accumulation of formaldehyde in the home. The use of a dehumidifier also helps. Oh yell, if you worried about formaldehyde stop taking hot showers - it produces formaldehyde too and has been said to be dangerous. I wonder if Tilson takes showers? or baths? hehehe

Kitty litter is also very unsafe due to dust it produces, but how unsafe? We must make choices to make our environment as safe as possible. I am not sure laminates are that unsafe if properly used. Even so, the short attacks successfully generated enough fear to not only slow the sale of laminates sourced from China, but also all laminates, which is a much more profitable business for LL than hardwood..

I have read articles about how dangerous the dust is from laser printers. It has been likened to cigarette smoking. And unlike formaldehyde it doesn't break down in sunlight nor can it be easily vented out of the room. I guess printer companies will be the next big short attack target.

1. Class action lawsuits are real. They will cost them money

2. Dangers about formaldehyde is in my opinion overblown and especially from laminate flooring. I just don't think there is enough studies linking formaldehyde at levels produced by even the worse of laminate flooring. Studies have had a hard time linking many cancers to those that use formaldehyde to embalm people in the funeral homes. There was one type of cancer linked to those working directly with formaldehyde in the funeral industry. But there exposure was much higher and over a longer period of time and even that study wasn't conclusive.

3. I don't even know whether China sourced laminates, at their worse, produce high levels of formaldehyde in homes since the process is supposed to seal the core, so as used in the homes, formaldehyde should be low.

4. LL has a great vertical business (mills to retail)that gives them a price advantage.

5. It is interesting to note that Tilson said if this happened to Home Depot they would immediately stop selling China sourced laminates. And added that LL didn't stop selling them. But LL has now stopped selling laminates sourced from China, as has Lowes. But Home Depot is still selling it.

6. The test used by short attackers are in my opinion useless because the formaldehyde levels in homes don't expose the core.

7. I don't know whether the price will go up or down from this point. But Class action suits, higher costs due to their decision to source laminates from Europe and the U.S and the possibility the DOJ could find them guilty of sourcing woods in violation of the Lacey Act. But LL claims they document the source of all of their woods box by box.

8. I don't know why Lynch resigned. It could be because he was a staunch supporter of his strategy to source laminates from China and the Company took that tool away from him.

9. If LL isn't going to zero, at some point this is going to be a screaming buy, but when. Is it now? or will it drop to $10 before things start to improve. Both scenarios could happen.

10. They only have $20 million in net cash, so they may have to raise cash through issuing shares or accumulating more debt. The latter being the most dangerous.

11. Laminates is a very profitable part of their business that once made up about 21% of total sales. That will not hold now, so upcoming earnings reports will likely be much worse than they are now, which could drive the price lower. Or the present price may reflect this already - But I just don't know.

I will be following the developments. I may be able to answer your questions about them. I certainly haven't covered all the concerns, but I hope I covered some of them. I don't own the stock, so I am writing this more because of my increased interest in them. But even if I bought some now, it would be the smallest of amounts. I think there will be more fallout due to the short-attacks, but I can't be sure, so I am watching and writing my notes. Don't confuse me with someone that actually knows for sure what is going on, but neither does Tilson or the other short attackers that have leveled these same attacks on LL since 2012, soon after LL started to label their invoices to comply with Prop65 California initiative.

I certainly understand selling here. It increases the risk and make no mistakes LL has become risky because the short attacks even if they are proven 100% wrong, will scare people from buying laminates. Those shorting the stock only has to generate fear and doubt.

If I own a large position, I too might lighten it. But I would hold some shares. Since I own no shares, I am interested in starting a small position and hope I can get more in the teens before this is all over. Regardless, perhaps we can all pitch in and follow the events that will happen over the next few quarters.

If you have other concerns, let me know.

tom e

thomas engle
TMF Coverage Fool

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Member Avatar gypsysailor (43.43) Submitted: 5/27/2015 1:20:33 PM : Outperform Start Price: $21.72 LL Score: -0.80

I like basement bargains.

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Member Avatar arshia2 (62.05) Submitted: 5/24/2015 3:51:29 PM : Underperform Start Price: $33.53 LL Score: +36.36

Due to negative news around the company, the stock price will struggle in the short term...

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Member Avatar MizzouFanVan (87.21) Submitted: 5/22/2015 11:00:40 AM : Outperform Start Price: $21.62 LL Score: +0.06

It'll take awhile, but my guess is after all the dust settles, this company will revive its reputation, and will end up being a leader in the industry regarding quality laminate flooring.

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Member Avatar CandyGram4Mongo (< 20) Submitted: 5/22/2015 10:04:13 AM : Outperform Start Price: $21.64 LL Score: -0.01

This is oversold; CEO leaving does not matter to consumers, they will still continue to sell wood and consolidate the market.

Rarely does the market give us an opportunity like this on a company with NO DEBT. That's right, NONE.

Good luck, this is my first ever CAPS pick....

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Member Avatar superstar (99.74) Submitted: 5/21/2015 12:04:28 PM : Underperform Start Price: $21.49 LL Score: -0.73

Normally I'm vulture buyer of beaten down names, but I think LL is in real trouble here. If there was hope of turning things around, its likely the CEO would be sticking around. In addition to the investigation by the Consumer Product Safety Commission about the use of formaldehyde in its laminated products, its future sales are going to be decimated by these allegations. You can imagine a future homeowner discussing flooring options, and the wife telling the husband, 'you are not putting in that LL flooring, it causes cancer.' LOL. Then you have the liability of LL probably having to replace existing flooring in homes across America -- that will be the death knell. If that wasn't bad enough, you have allegations the company imported illegally sourced wood from protected animal habitats. So, in addition to LL giving U.S. consumers cancer, LL is killing panda bears by taking away their habitat. Wow, talk about a perfect storm that LL brought on itself. I see this one going to zero.

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Member Avatar Amoeba17 (78.97) Submitted: 5/21/2015 10:55:40 AM : Underperform Start Price: $21.26 LL Score: -1.71

This company is a mess right now.

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Member Avatar CMFSircc (83.44) Submitted: 5/21/2015 10:02:34 AM : Outperform Start Price: $20.98 LL Score: +2.82

Let us see if the CEO resigning turns this company back around. Rock bottom.

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Member Avatar StarbellySneech (94.46) Submitted: 5/13/2015 1:17:36 PM : Outperform Start Price: $26.68 LL Score: -20.27

Long term winner, especially at this beaten-down price.

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Member Avatar 23dluxe (36.98) Submitted: 5/1/2015 11:25:21 PM : Outperform Start Price: $27.28 LL Score: -21.62

oversold

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Member Avatar ethwc (66.94) Submitted: 5/1/2015 12:08:50 PM : Outperform Start Price: $27.29 LL Score: -22.46

Excellent model and product line. This security is on sale based on questionable problem in only one one of its product lines and a single slow quarter. Getting in now should provide nice return over the next several years.

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Member Avatar Truth2Power (57.13) Submitted: 4/30/2015 12:59:45 PM : Outperform Start Price: $26.99 LL Score: -21.63

After yesterday's drop on weak earnings, I think that the stock has gotten cheap enough to bet on a turnaround. LL has done a lot of things right, and the formaldehyde thing seems to me to be a hatchet job. The Justice Department investigation may be a bit more serious, but I'm willing to buy on the cheap even with this risk involved.

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Member Avatar TMFDeej (99.32) Submitted: 4/30/2015 12:22:25 PM : Outperform Start Price: $26.98 LL Score: -21.57

I'm a glutton for punishment. I cashed in on a nice bounce after the last implosion. Let's see if I can do it again.

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Member Avatar Marty1985McFly (50.63) Submitted: 4/29/2015 1:09:32 PM : Outperform Start Price: $27.16 LL Score: -21.85

going contrarian long term with this pick

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Member Avatar km00nster (< 20) Submitted: 4/29/2015 11:25:11 AM : Underperform Start Price: $27.32 LL Score: +21.75

Terrible earnings, DOJ criminal charges coming, CFO leaving. 15 dollar stock AT BEST

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Member Avatar AnsgarJohn (99.14) Submitted: 4/26/2015 1:04:15 PM : Outperform Start Price: $27.50 LL Score: -22.67

Nice dip on bad news.

Lumber Liquidators, first Q numbers should be fine. Customers will buy where lumber is cheap and housing market will pick up based on demographic trends. Peter Lynch value: $57.

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Member Avatar buynholdisdead (21.26) Submitted: 4/24/2015 12:53:03 PM : Outperform Start Price: $32.98 LL Score: -35.06

This company has had a big fall from grace. The shorts came out and tested their product using the deconstructive method. While this is an acceptable test according to Carb it is not the final test. But the market was scared off and the stock dropped. While the CEO did a very poor job of explaining his position I think that people will eventually forget this incident. So this is a call that in two years LL will be much higher.

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Member Avatar SashaTheBOLD (< 20) Submitted: 4/23/2015 10:03:35 AM : Outperform Start Price: $33.76 LL Score: -37.10

The 60 Minutes report was bogus journalism. The EPA's independent testing will confirm that LL is not violating Formaldehyde regulations and so the risk of lawsuits will dissipate. Also, a couple quarters of reports will indicate that sales have not plummeted enough to warrant the precipitous drop in stock price. In short, the market overreacted to faulty bad news, and the correction will be favorable for LL.

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Member Avatar CMFFrankDip (62.62) Submitted: 4/22/2015 10:00:33 PM : Outperform Start Price: $33.98 LL Score: -37.61

Whitney Tilson's initial short thesis had nothing do do with China made laminate flooring - it was about supply disruption around deforesting in Russia - he was correct and profited. He has now morphed his original thesis into a cause celeb to publicity and increase AUM for his funds. He is a Bill Ackman wannabe. The stock is badly beaten down and oversold. I expect a rebound in price as the headline risk wanes.

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Member Avatar CMFMikenpdx (23.68) Submitted: 4/22/2015 12:35:29 PM : Outperform Start Price: $33.62 LL Score: -37.05

i think the stock could be undervalued at this point. who knows if it ever gets back to its old highs or how long that will take if it ever does but it probably deserves to be higher than today's quote.

perhaps there is not as much brand damage as some may have thought. consumer's memories are sometimes shorter than those of investors who follow businesses more closely.

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