BGFV Stock - Guns, Sports, an Extremely Undervalued Stock, and a Potential Short Squeeze

Big 5 Sporting Goods (BGFV) is a sporting goods retailer that is primarily based on the West Coast. For those who have never been inside one, it is most comparable to a Dick's Sporting Goods on a smaller scale but with more emphasis on Gun sales. I'm not going to go into their whole backstory, but I am going to make a case for why I think this stock can reach $40-50 in the next several months.

BGFV Stock

I was initially looking for potential short squeezes when I stumbled on the strong fundamentals of Big 5. The company has a high short interest of 42% of the outstanding shares, so the short squeeze potential is there, but that isn't what really blew me away.

BGFV Stock

As I started digging, I realized that the company was fundamentally great and very undervalued. Earnings have increased quarter over quarter, the company has no debt, and they recently increased their dividend to 4%, while increasing their cash balance. With a market cap of $550 million, 22 million authorized shares, EPS of 4.84, and P/E ratio of 5, it is very hard to argue that this company is currently trading at fair value.

I could continue to go through the different ratios that only increase my bullish point of view on the stock, but I think the numbers I already presented speak loud enough. With Dick Sporting Goods' market cap at $11 Billion, I think that Big 5 can reach 1/11th of that at $1 Billion, making each share almost double what it is worth now. I'm excited to see where this stock goes over the next couple weeks and months.

My Position:

OPTIONS

I have 14 OTM options totaling $3,390 of my invested capital:

10/15/21 OTM $45c x2
4/14/22 OTM $35c x12

 

SHARES

I currently own 65 shares with a cost avg. of $24.42.

Update to Position and Sentiment: 11-Oct-21

It is almost market close and BGFV is down to $23.37 at the time of me writing this update. I'm still very bullish on Big 5, but I have made some changes to my positions. I sold the 4/14/22 OTM $35c when the stock broke $25 on October 7th as well as all 65 of my shares. I actually sold to enter into a new position in Smile Direct Club ($SDC). Today, I bought 4/14/22 OTM $25c (x2), so this is what my updated position looks like.

BGFV - 0 Shares, 10/15/25 OTM $45c x2 and 4/14/22 OTM $25c x2

It is looking like my $45c are going to expire worthless, but I'm very confident my $25c will perform very well.

 

 

 

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