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Thesis Statement
It's been over six months since I last wrote on the Big Lots, Inc. (BIG) stock, which has come down over 46% since my neutral rating. The decline is significantly attributed to its wildly
Big Lots: Reversion To The Mean Is Still In Progress
Summary
- Big Lots' share price is performing poorly compared to its competitors despite having a better EPS CAGR.
- The company has much better valuation metrics than its peers, displaying the stock at a bargain.
- With sound fundamentals and cheap valuations, the company may allure investors to jump in and buy the stock; however, the high volatility heeds caution.
- I am neutral on the stock because I believe the company can be a good long-play, but as it is likely to go further down during the year, an impulse decision to buy at the current level would better serve to remain in check.
Hi, I'm Yiannis. Spotting winners before they break out is what I do best.Experience: Previously worked at Deloitte and KPMG in external/internal auditing and consulting. Education: Chartered Certified Accountant, Fellow Member of ACCA Global, with BSc and MSc degrees from U.K. business schools. Investment Style: Spotting high-potential winners before they break out, focusing on asymmetric opportunities (with at least upside potential of 2-3X outweighing the downside risk). By leveraging market inefficiencies and contrarian insights, we seek to maximize long-term compounding while protecting against capital impairment.Risk management is paramount—we seek a strong margin of safety to protect against capital impairment while maximizing long-term compounding. Our 4-5 year investment horizon allows us to ride out volatility, ensuring that patience, discipline, and intelligent capital allocation drive outsized returns over time.Investment Methodology: Identifying High-Conviction Opportunities1️⃣ Leadership & Management Analysis • Proven track record in scaling businesses. • Smart capital allocation and insider ownership. • Consistent revenue growth and credible guidance. 2️⃣ Market Disruption & Competitive Positioning • Strong technology moat and first-mover advantage. • Network effects that drive exponential growth. • Market penetration in high-growth industries. 3️⃣ Financial Health & Risk Management • Sustainable revenue growth with efficient cash flow. • Strong balance sheet and long-term survival runway. • Avoiding excessive dilution and financial weakness. 4️⃣ Valuation & Asymmetric Risk/Reward • Revenue multiples vs. peers and DCF modeling. • Institutional backing and market sentiment analysis. • Ensuring downside protection with massive upside. 5️⃣ Portfolio Construction & Risk Control • Core Positions (50-70%) – High-confidence, stable plays. • Growth Bets (20-40%) – High-risk, high-reward opportunities. • Speculative (5-10%) – Moonshot disruptors with massive potential.
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