A New Stock to Consider- Levi Strauss (LEVI)
Posted: Wed Nov 30, 2022 1:16 amDISCLAIMER: 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...
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...
