Trade of the Month: Going long on Cashbuild and short on Italtile

Until as recently as August, the share price performances of Cashbuild and Italtile had been almost identical over three years. At first blush, this makes it sound like there’s not much of an opportunity here for a relative play. A decent counterargument can be made that such convergence over time suggests that short-term dislocations present an opportunity.

Italtile, which sells tiles, sanitaryware and related products, was the clear winner during the pandemic, perhaps due to its larger relative exposure to home improvement rather than construction. As the country emerged from Covid and restrictions were relaxed, Cashbuild, a retailer of building materials and associated products, played catch-up due to relative demand from the construction industry, while the wealthier consumers at Italtile started spending on holidays instead...

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