Floor & Decor Holdings, Inc. (FND) | Daily Alert July 20
Floor & Décor is currently one of our favorite retail cookie-cutter stories out there, and it has all the characteristics of a stock that should do very well over time.
Fundamentally, the big idea is that the company is upending the hard-flooring retail industry; at the end of Q1, Floor & Décor operated 140 warehouse-style stores that have everything professionals and DIYers need. Whereas the typical competitor might have a couple hundred different products available in-house, Floor & Décor has 1,400 or so, allowing customers to see/touch/feel/buy whatever they want right away.
Specifically, the top brass generally aims to increase the firm’s warehouse count by 15% to 20% annually, and they see the potential for at least 400 locations in the U.S. alone. Given that Floor & Décor had just 140 warehouses open at the end of Q1, there’s obviously years of rapid store growth ahead, and that doesn’t even account for the likelihood that management’s target of 400 locations is probably conservative. Indeed, for this year, the company is aiming to open 27 new locations (just over 20% growth from year-end 2020), and seems on track, with 13 announced openings by the end of June.
With shares bouncing off their 40-week line on good volume and heading higher since, there will likely be wiggles, but we believe there’s a good chance the next up move has started. BUY.
Timothy Lutts, Cabot Stock of the Week, cabotwealth.com, 978-745-5532, July 12, 2021
Holley Inc. (HLLY) | Daily Alert August 4
Investing after a company merges with a SPAC can reduce investors’ risks. By waiting, investors have the opportunity to understand the underlying (acquired) company, explore regulatory filings, select the more promising ones while avoiding those with speculative or suspect business models, and then wait for an attractive entry price.
Holley, Inc. was founded in 1903. The company is the iconic manufacturer of high-performance after-market car parts, which is an attractive growth industry. After eight sizeable acquisitions in the past seven years, the company has a portfolio of 60 brands across all major categories of parts, with many of its brands holding the #1 market share position. Holley’s revenues are nearly triple its nearest competitor, a significant advantage that it is extending by acquiring companies in the otherwise fragmented industry.
Holley is also an innovator, with 40% of its sales coming from new products introduced over the past five years, including a growing roster of high-performance electric vehicle parts. And, unlike original car manufacturing, which will migrate to electric vehicles, there will likely be enduring long-term demand for high-performance gas-powered vehicle after-market parts. Holley is also expanding its online distribution platform which should build its brand value. Holley has attractive margins, generates solid free cash flow, and has a reasonable debt load. At about 10.8x projected 2022 EBITDA, the shares of this high-quality company sell at a large discount to peers.
Bruce Kaser, Cabot Turnaround Letter, cabotwealth.com, 978-745-5532, July 28, 2021
LMP Automotive Holdings, Inc. (LMPX) | Daily Alert August 9
LMP Automotive’s plan was to bring the subscription model to the auto market. It would buy partial interest in a bunch of dealerships for the inventory and then use their own fulfillment system to power the subscription model from the cloud.
This last quarter, LMP’s revenue went from about $6 million to $33 million. LMP turned a profit of about $2 million. It added $1.3 million to its cash balance. And gross margins doubled to 18%.
LMP says 2Q revenue should jump to $147 million (don’t forget, that’s from $33 million). Gross profit is expected to go from $6 million to $26 million. And the company is going to double its cash position.
LMP is no longer doing the “subscription” car business. It’s because there isn’t enough inventory to go around…
Turns out this is a pretty amazing problem to have. Demand for cars is incredibly strong—that’s why those gross margins are surging. Plus, it turns out the first step of the LMP business model—buying into dealerships—is strong enough to sustain the whole operation. Once supply is resolved in a couple years, LMP will revisit the subscription idea and we may have a whole new upside catalyst.
In the meantime, own it because the company is about to see a surge in revenue and profit. LMP Automotive is a speculative buy under $25.
Jason Williams, The Wealth Advisory, angelpub.com, 877-303-4529, July2021
*Chewy, Inc. (CHWY)
52wk H. $120.00 52wk L. 52.22
Mkt Cap: $37.85B, EPS: -0.01, Beta: 0.08
The provider of pet food/products, pet medications for dogs, cats, fish, birds, horses and reptiles. Engaged through e-commerce. Pet owners during pandemic flocked to Chewy. Guidance for year ’21.
Revenue growth of $9.00B and $11B for ’22. Could surge $200M for ’21 and $440M from ’22. Topping at 120 in March ’21. Sinking to low 50s in May ’21.
Reversal has broken through death cross: (70-73), gapping up (75-83) to recovery high of (83-90).
BUYING RANGE: 78-91
NR TERM OBJ: 103
INTERMED OBJ: 126
STOP LOSS: 69
Joseph Parnes, Shortex Market Letter, shortex.com, 800-877-6555, August 2021