A New Stock to Consider- Levi Strauss (LEVI)

[Recyclersteve]

DISCLAIMER: There is no such thing as a guaranteed profit in the stock market. Anything that seems close to a sure thing can backfire, so it is important to have a backup strategy for when things backfire.

NOW THE PITCH: I want you to think about the so-called safe stocks, ones that everyone knows that are very unlikely to go bankrupt anytime soon. Examples are probably mostly retail stocks such as Home Depot (HD), Costco (COST), Walmart (WMT) and Coca Cola (KO). There are others that don't trade publicly such as In-N-Out Burger and Chick-Fil-A that lots of people would likely buy if/when they have IPO's and become publicly traded. Somewhere in between are stocks that are well known NAMES but not well known stocks. As a matter of fact, many don't even know that some of these stocks are publicly traded. The example I want to highlight here is the maker of Levis, namely Levi Strauss & Co. (Ticker: LEVI).

I was going through activity on one of my brokerage accounts and looking back through some old statements. Suddenly I saw a profitable trade for LEVI that I'd totally forgotten about for several years now. I don't know why I forgot about it, but I never hear anyone talk about the stock.

Now let's take a look at some of the things you should consider. LEVI has been around since way back in 1853, even BEFORE the Civil War. They got started because miners needed rugged pants that would handle the rigors of their jobs. LEVI is a profitable company with a P/E (Price to Earnings) Ratio of 11.46, which represents a good value to many. I'd say that P/E's of 15-20 are much more common. LEVI closed Tuesday at $16.16 a share, so it is a lot cheaper than, say, Costco at $500+ a share.

LEVI pays a 2.98% dividend, which isn't bad. There are mutual funds that are not allowed to buy stocks that don't pay dividends, so it is nice to have them on my side.

The stock, at $16.16 a share is well above the important $10 a share price. Why is this important? It is important because there are mutual funds which must sell when stocks fall below the $10 level. Knowing that, keep in mind that there are people who want stocks to go DOWN instead of up. Those are short sellers and hedge funds. I'd say it is to be expected that as a stock nears the $10 threshold (especially when it has never been there before or it hasn't been there in many years) short sellers will start to lick their chops and try to push the stock downward. Except for a single day (4/3/20) early in the COVID crisis, this stock has never been below $10 a share.

The term short interest represents the percentage of actively traded shares (called the float) which have been sold short. As of November 15th this figure for LEVI was 9.75%. I'd prefer that it be under 5%, but the current level isn't a deal breaker IMHO. If it were 20%+, I'd have some fairly serious reservations, but would still consider buying the stock.

Liquidity is an important factor as well. You don't want to buy a stock that trades thinly and is likely to be hard to sell due to wide spreads between the bid and ask prices. LEVI trades about 2.4 million shares a day, which is ample liquidity for all but very very large positions of say, 20,000 or more shares being liquidated at a single time.

Keep in mind that we are in the middle of the Christmas buying season. This could be good for their stock, but of course there is no really good way to predict that.

I like to buy stocks in real companies which are on sale, or, say, down 30% or more from recent highs. LEVI closed Tuesday at $16.16. It was $30.84 a share on 5/4/21, a little over 1 1/2 years ago. So it is down 48% since then. A true value IMHO and I bought some stock on Tuesday when I saw this.

I will admit that I am more of a trader type than a buy and hold person. I'd be quite happy to take a 10-15% profit in 2-4 months. I honestly think that at this price the stock currently can appeal to both traders and long-term holders. As a matter of fact, I have a neighbor who is more of a long-term type and she will likely buy the stock in the next few days when she sells something to raise the funds. Don't expect to double your money in the near future. That isn't realistic. But a profit of, say, 10-40% or so by next May (don't forget the old adage "Sell in May and go away"- markets are typically weak during the summer doldrums) is, I think, very realistic. The midpoint of that is 25% which is very decent for a 6-month return.

For those who understand the trading of options, you can consider selling covered calls to goose your returns a bit. Thankfully, this stock does have options trading available.

I'm curious what everyone else thinks? Does anyone else own this stock? Has anyone traded it before? Did you even know it was publicly traded? Are you a fan of the Levi's product? What do you plan on doing? Can you think of any other household name stocks which are potentially good values and relatively undiscovered right now like LEVI? I'm looking forward to what others have to say about this one...

[stas3000]

Did not know LEVI was public. Looks like a pretty solid, sort of a "classic" value stock. Will look into it more. Thanks.

One company in that space that I'm following is CROX. Analysts have not been very accurate forecasting its price. It's been a wild ride. About a year ago it was over $150 and a few months back crashed to $50 or so. Now at $100. Results have been strong last several quarters so those mad price swings make little sense. Product offering has been expanded in recent years and I think the company is worth keeping an eye on. I have a small position and was happy to increase it when prices dropped to the $50's.

[Silver4face]

I am definitely a fan of Levi's products, ESPECIALLY VINTAGE LEVIS. However, I am not a fan of the stock market. Never was, never will be. But I do agree with you that a long term solid company at only 16 dollars a share is a good play, especially factoring in the 31 dollar price on 5-4-21. I am guessing that you will buy, or have you already done that?

[natsb88]

Levi's partnered with Everytown and Bloomberg to advocate for gun control in 2018. They pledged $1 million to the cause that year. Conservatives blasted them and they haven't been particularly vocal about it since, but the CEO is definitely still implementing "woke" company policies and probably still funding anti-gun organizations. However that may factor into investment decisions...

[Recyclersteve]

I am definitely a fan of Levi's products, ESPECIALLY VINTAGE LEVIS. However, I am not a fan of the stock market. Never was, never will be. But I do agree with you that a long term solid company at only 16 dollars a share is a good play, especially factoring in the 31 dollar price on 5-4-21. I am guessing that you will buy, or have you already done that?

I bought the stock on Tuesday.

My daughter says she bought her first ever pair of Levi’s about a month ago and likes the way they fit. Her boyfriend bought a pair of black Levi’s and they fit nicely as well. My daughter says she spent about $100 and she was happy to buy the stock after a nice experience with the product. I told her this might be a good way to get her jeans for free, since her profit will likely be well more than the cost of the jeans. Also, several friends and neighbors have already bought the stock.

I’d be willing to pay up to $18.50 a share for the stock.

[Silver4face]

I hope you do well with your investment. Some stocks do well, some don't. The same goes for investors. Another thought comes to mind. What about the LEE jeans company? Are they a public stock? If so, would you invest or recommend it like you did with Levi's?

[Recyclersteve]

I hope you do well with your investment. Some stocks do well, some don't. The same goes for investors. Another thought comes to mind. What about the LEE jeans company? Are they a public stock? If so, would you invest or recommend it like you did with Levi's?

As best as I can tell Lee Jeans isn’t publicly traded. The only company I see with the name Lee is Lee Enterprises (Ticker: LEE), a publishing company. Also, the Lee Jeans website doesn’t have a tab for investors and doesn’t display a stock price. It is always possible that Lee could have a parent company with a different name, but, frankly, that would surprise me.

[JadeDragon]

Lee and Wrangler and “Rock and Republic” are the brands of https://www.kontoorbrands.com/investors and I have no opinion on that stock but it is NYSE listed with a healthy market cap. I’d call that a direct competitor to Levi

[Recyclersteve]

JadeDragon:

Thanks for digging up Kontoor Brands! It trades under the symbol KTB. They do indeed appear to have the Lee brand and others as you say.

I noticed that LEVI began trading on 3/21/19. Then, on 5/28/19, KTB began trading publicly. They likely watched the LEVI IPO and liked what they saw. Or an investment banker could have rushed to pitch Kontoor on the benefits of going public and the money they could raise for future expansion.

This might be splitting hairs a bit, but KTB has had more of a run recently than LEVI, and might be in need of a bit of a pullback. KTB is up 39.4% from the recent low on 9/30/22. LEVI, on the other hand, it up 25.4% from the recent low that occurred on 10/13/22. The short interest is 12% on KTB and 9% on LEVI, so that is another thing favoring LEVI.

One thing I like BETTER about KTB is the dividend. It is 4.29% vs. 2.98% for LEVI, and both dividends appear to be sustainable due to plenty of earnings.

This doesn’t really matter if you are trading 100-200 shares, but LEVI averages 2.4 million shares traded a day vs. 482k/day for KTB. So it would likely be much easier for those with 10,000 shares or more to get in and out of LEVI without moving the stock too much.

Thanks again for finding this one!

[JJM]

THANKS for posting this Recyclersteve, I'm usually a day late and a dollar short by the time I've seen your other musings, but I got in on this one. LEVI popped after hours last night - I got in at sub-$16 ~6 weeks ago, and out at mid-$17's today.

[Recyclersteve]

THANKS for posting this Recyclersteve, I'm usually a day late and a dollar short by the time I've seen your other musings, but I got in on this one. LEVI popped after hours last night - I got in at sub-$16 ~6 weeks ago, and out at mid-$17's today.

Nice to hear. Thanks for the feedback.

[Recyclersteve]

Sold my LEVI today. Made 10% profit in slightly less than 2 months. Except for the last few days, this one was pretty boring to hold onto.