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Buying Back In To Weis Markets

Patrick Doyle profile picture
Patrick Doyle


  • Since I said goodbye to Weis Markets a few years ago, the shares have remained flat in spite of a spectacular financial performance in 2020.
  • With one in six restaurants shuttered permanently or long term, companies like Weis are obvious beneficiaries. I think the dividend is sustainable, and the shares are cheap.
  • For those nervous about simply buying the stock, I recommend selling put options on this name. These are thinly traded in this case, but can be quite profitable.

I'm as much of a fan of combing the history of my recommendations to present myself in as positive a light as possible as the next Seeking Alpha contributor, and in support of that effort, I want to write about Weis Markets (NYSE:WMK), dear readers. I've written two articles on Weis on this forum, the first of which was bullish. I wrote the second only two months later, where I recommended taking profits on the company, and gave it the incredibly original title "Taking Profits in Weis Markets." The trade worked out well, netting a profit of about 38%. Since publishing that second article nearly three years ago, the shares are flat against a gain of ~41% for the S&P 500. Much has happened since then, obviously, so I thought I'd check in on the name again to see if it's worth buying at current prices. Slightly more important than having my ego stroked is the need to find profitable opportunities, and a profitable dividend payer that's underperformed the overall market may qualify. As is frequently the case, I'll try to determine whether or not it makes sense to buy shares by looking at the financial history here, and by looking at the stock as a thing distinct from the underlying business. A discussion about short put options may also make an appearance.

I'll jump right to the point for those who want more of a summary than was provided in the bullet points above, but are (understandably) unwilling to wade through an entire article. Since 17% of restaurants are closed, grocery stores are obvious beneficiaries. This is evidenced by the fact that Weis has done very well in the age of Covid. In spite of that, the shares remain relatively inexpensive. For that reason, I recommend buying back in. For those who are (probably understandably) worried about a market correction, I think short put

This article was written by

Patrick Doyle profile picture
I'm a quant investment newsletter writer who marries fundamental analysis with the latest research in momentum. Over the past few years, I’ve developed a piece of software that helps me track the level of optimism and pessimism embedded in stock price. I seek to challenge the assumptions embedded in price by profitably exploiting the disconnect between what the market thinks and what is a likely outcome. I invest in those companies that have a greater than average chance of giving us all a surprise in the next few months.

Analyst’s Disclosure: I/we have no positions in any stocks mentioned, but may initiate a long position in WMK over the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Between the time I wrote and posted this article, I sold 10 of the puts described in this article for $2.35, and I'm buying some shares this week.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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Comments (9)

TLCVI profile picture
Possible Points for WMK’s Approximate 10,502 Stockholders to Raise with Management:
1. Why have such a large number of shares been authorized?
2. Can exact depreciation rates of the Company’s assets be provided?
3. What are the Company’s ‘other current assets’ not clarified on the latest 10-Q filing?
4. Can the Company elaborate on their habit of reclassifying items?
5. Why has the income received from dividend and coupon payments not been separated from the unrealized gains and losses of the investment portfolio’s assets?
6. Does the Company believe it’s investment portfolio alternative to holding cash is yielding the best results possible? If so what assurance can be provided to Shareholders?
7. Why did the Company’s reported net income for fiscal years 2014, 2013 and 2012 change from the 2014 to the 2015 10-K filing?
8. “The Food Lion acquisition resulted in a 2016 Gain on Bargain Purchase Net of Tax being recorded of $23.8 million” [9], why was this the case?
9. Can the Company elaborate on the ‘routine litigation’ mentioned, or any other type of litigation the Company is involved in?
10. Can the Company provide more information on the $3.9 million non-binding purchase agreement for a property in Hamlin, PA? Was this a related party transaction?
11. Why does the ‘Beneficial Ownership of Directors and Management’ table not fully reflect the shares held that render this a "controlled company"?
12. What are the Company’s intentions with their treasury stock?
13. Does the Company not think that some of the luxuries they afford to Management are a bit exuberant?
14. Does the Company plan on replicating their 65,000 square-foot ‘prototype’ store or similar types in the not-so-distant future?
15. Why did the Company dismiss Ernst & Young LLP, and appoint RSM US LLP?
16. What constitutes change in control?
17. Why does the Company constantly advise for the frequency of the advisory vote to approve executive compensation to be 3 years?
18. What are the ‘special meetings’ mentioned and what matters are discussed at such?
19. Can the Company provide any more information on the ‘Disclosure Committee’ referenced in the 10-K filings, but not the DEF 14As? And why is this the case i.e., why are they only mentioned in the former SEC filing but not the latter?
Market Malocclusion profile picture
Took a look back at your strikingly prescient March 2018 call on WMK; the hatred your article received made for very entertaining reading. Goes to show, if everyone loves an idea, it's probably too late to make a profit. Maybe you can run a correlation between angry comments and profitable ideas.

Considering that you wrote this most recent bullish article near the upper extremes of WMK's historical range, am I out of place in assuming that you anticipate shares piercing all-time highs?
Patrick Doyle profile picture
@Market Malocclusion
Hi and thanks for the comment. Yes indeed, I've built something I call the "vituperative index" and I've found that my most profitable ideas have been the least popular.
I do think it's going to pierce former highs. I like the value here, and I think it'll continue to benefit from the combination of return to work + the tragic shutdown of restaurants.
Full disclosure: I'm much more excited by my short puts here.
Thanks again for the comment and take care.
Market Malocclusion profile picture
@Patrick Doyle I would truly be interested in a published vituperative index.
vantuckman profile picture
Patrick Doyle: Thanks for the article! Good to hear from you again. I'm a little bit of a worrier, so I have to ask: How confident are you that demand for food will not decrease? Waiting (anxiously) for your reassurance. Stay safe! Kirk
Patrick Doyle profile picture
Hi Kirk. You're very welcome and thanks for the comment and question.
It's a good question, and there are a range of environments where demand for food decreases. I've been to many a place where food insecurity is a "thing", and the United States, for all of its problems, is nowhere near that state of dysfunction so the supply of sufficient calories should remain constant.
The economy is in a weakened state, but even in that state, people eat. They eat more of some stuff and less of others, but it's such a basic need that we can assume X no. of people will consume between Y and Y^ calories a day. So some cheaper varieties may have more robust demand, and we may consume less smoked salmon for instance. In any case, I'm pretty confident Weis will be there to supply it.
I hope that answers your question. LMK if it doesn't and I'll take another stab.
You also stay safe!
We should all be worried. Those two-, three-, and four-day bear markets are just brutal. I don't see how anyone survives.
wsoyke profile picture
@Ruble Noon
No such thing as a 4 day "bear market".
A 4 day significant drop in price is a "gift market"
Also the best time to sell puts. Why? The price is already down, could go down further toward your strike price, but you're paid a premium for that. It could drop even more and you could be put shares. Your temporary loss would only be if it dropped past your strike and premium price. From that point the stock is much more likely to recover. Or it doesn't drop and you keep the premium.
So again, 4 day drop = opportunity, not a bear.
@wsoyke Yeah, it was a joke. Everybody got it but you.
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