UFI

Home Depot Co-Founder's Contrarian Buying Spree: Accumulates 68K Shares of Unifi ($UFI) on Every Dip

12/03/2025 21:36

Unifi ($UFI) is a Greensboro, North Carolina-based recycled and synthetic yarn manufacturer founded in 1969, employing approximately 2,500 people worldwide. The company produces recycled polyester yarns under the REPREVE brand, serving diverse markets including apparel, automotive, home furnishings, and industrial textiles. The most notable development is the persistent buying activity by director Kenneth Langone, the renowned co-founder of Home Depot. In February 2025, when shares traded at $5.43-$5.55, he purchased 34,097 shares. More significantly, as the stock declined further to $3.48-$3.53 in November-December 2025, he added another 33,738 shares. This contrarian investment pattern, where he buys more as prices fall, is particularly noteworthy given Langone's 40+ years of Wall Street experience and suggests he may be spotting value that the market is missing. Currently, $UFI trades at $4.53 (as of September 2025), down approximately 42% from its August 2024 peak of $7.75. This decline stems from structural challenges across the textile industry and the company's ongoing losses. Q1 2025 revenue fell 7.9% year-over-year to $135.67 million, while net loss per share widened to $0.56, though this beat market expectations of -$0.60. However, current valuations have reached extremely attractive levels. The price-to-sales ratio of 0.11x significantly undercuts the industry average of 0.5-1.0x, while the price-to-book ratio of just 0.26x represents a 74% discount to book value. Despite being a small-cap stock with a market capitalization of only $64.26 million, the company maintains $20.55 million in cash, limiting near-term liquidity risks. Unifi's biggest challenge lies in the textile industry's broad malaise. According to Zacks, textile products rank in the bottom 4% among over 250 industries, with trade uncertainties and rising raw material costs creating persistent headwinds. U.S.-China tariff policies and NAFTA renegotiations particularly impact the company's global supply chain operations. Conversely, Unifi stands positioned as a key beneficiary of sustainability trends. Its REPREVE brand recycled yarn business aligns with expanding ESG investment flows and provides long-term growth potential. The company's plastic bottle-to-yarn recycling technology plays a crucial role in helping global fashion brands achieve sustainability goals, creating differentiated competitive advantages. Investors should monitor key indicators in upcoming quarterly results: revenue stabilization signals and cost structure improvement benefits. The company is pursuing restructuring programs to reduce operating expenses, and visible progress could serve as a catalyst for stock recovery. Additionally, whether Langone's persistent buying attracts other institutional investor interest bears watching. In an optimistic scenario, textile industry recovery combined with surging recycled yarn demand could drive revenue growth reversal. Given current extreme undervaluation, any signs of profitability turnaround or industry recovery could trigger substantial stock appreciation. Analysts' 12-month price target of $12 suggests 165% upside potential from current levels. Risk scenarios involve prolonged textile industry weakness coupled with accelerated cash burn. With levered free cash flow currently negative at -$3.85 million, continued losses could necessitate additional capital raising, leading to existing shareholder dilution. Overall, $UFI presents contradictory signals: structural difficulties alongside persistent buying from a renowned investor and extreme undervaluation. Near-term performance will hinge on industry recovery signs and earnings improvement, while long-term success depends on capturing sustainability trend benefits.