Seeking Alpha

Analysis: Canada exit and freezers set up Big Lots for gains

  • Piper Jaffray upgrades Big Lots (BIG) to an Overweight rating from Neutral.
  • The investment firm has a price target of $45 on the closeout retailer.
  • What to like about Big Lots: An exit from Canada by the company sets it up for more buybacks, while the addition of freezers and coolers could drive sales.
Comments (1)
  • spiritgide
    , contributor
    Comments (20) | Send Message
     
    At one point I had more than 12,000 shares of this stock. With the arrival of David Campesi, I believe the entire picture changed at BIG. and I now own zero shares. I would get back into BIG if I thought it was on the right path, but I have no confidence in it at this point.

     

    I'm a believer in thoroughly researching management. That's because I know that winners tend to consistently win, and losers tend to consistently lose- so I always look for companies with solid winners at the helm. Of course, I immediately started researching Campesi when he was hired.

     

    Campesi's record is strange, in that there are voids in his timeline of employment and contradictions in his reported positions. He did spend 6 years with Sports Authority as a VP but he left there in August 2011. After that, I couldn't find much. Filling the gap in his timeline, finding out where he was before joining BIG, took a long time. Almost like the period after leaving SA had been left out or tucked under the rug intentionally. That last period turned out to have blanks with no reported employment, but his last verifiable position was a year as CEO for "Respect Your Universe" (OTCQB:RYUN). That is a penny stock with a current price of $0.07, a TBV of $0.02, and zero profits. Not exactly a gold star position for your executive resume.

     

    My questions- IF Campesi was a winner, why would he take a position running a penny stock operation that accomplished nothing? WHY would the directors of BIG hire a penny-stock CEO and pay him 5M+? Makes no sense to me at all.

     

    I was astounded that the stock rose this spring given his actions and the earnings disasters. Apparently, some believe his pitch and think he's on the right track and are willing to pay a high price for that faith rather than requiring substance. I'm not.

     

    I invest based on future potentials, meaning the probability and extent of possible profits or loss by a company. I have been able to calculate these things for many stocks with substantial success for many years, including BIG for 6 years, until now. The current re-incarnation of BIG might be an exception to my formula, but I think the chance of that is small and the long-term odds are against it.

     

    I've watched analysts rate this stock using hindsight for most of the time I've followed it. When it's going up, they forecast it's going up... when it's going down, they forecast it's going down. Brilliant. I've also watched people buy or sell based on that short term, past-tense logic. In fact the old BIG was highly predictable well beyond the limits analysts seem to have, and as a result BIG has made me a lot of money over the years.

     

    BIG may or may not still have profit potential for investors- but I believe the risk is now very high, and the predictability unreliable. Time will tell, not the short-sighted analysts.
    21 Apr 2014, 10:36 AM Reply Like
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