Dealmaker’s Diary: Add This Undervalued Retail Pioneer to Your Cart

Alpesh Patel|July 11, 2024

Everyone’s looking for AI plays… but it’s getting harder to find tech stocks that aren’t overbought.

That’s why my proprietary GVI system scans ALL publicly traded companies to find gems worth looking at.

Like this bulk retail pioneer that’s been serving up jumbo-sized gains over the past few years…

It hits a solid 7 out of 10 on my GVI rating and is a whopping 30.9% undervalued. Like the prices of the products lining its shelves… that’s cheap!

The stock has low volatility and is soundly beating the market.

And the MACD shows strong rising momentum for a solid run higher.

Get all the details on this king of retail – including the ticker – in my latest video.

Click on the image below to watch it.

TRANSCRIPT

Hi, everyone, including my GVI Investor family. It’s Stock of the Week time.

I’ve got one you’ve probably all heard of… and it’s not tech and it’s not AI. Well, it sort of is because everything’s tech and AI nowadays.

It’s BJ’s Wholesale Club (BJ).

“What are you thinking, Alpesh? Why are you not just giving us tech?”

Well, it’s pretty difficult to find tech companies which aren’t overbought.

So I look for companies which hit all my numbers, and this is one which came across my hedge fund desk.

It is headquartered in Marlborough, Massachusetts. It pioneered the warehouse club model back in 1984. It has the large format, high value, high volume warehouse club spanning some 20-odd states. So it’s very much America-based.

You’ll know Costco has a similar kind of model in many ways.

What’s good with this company is the numbers. So let’s have a look at some of those.

On my Growth-Value-Income – GVI – rating, it’s a 7 out of 10. Now, 7, 8, 9, or 10 are good enough to meet my minimum requirements.

Remember, my proprietary algorithm looks for companies which are showing solid growth, good valuation, and good income. And I weigh value more than growth… growth more than income.

The forecast P/E is a little bit expensive. In other words, you’re paying 22.4 dollars for every expected dollar of profits. In a non-tech company, it’s a little bit expensive.

The cash return on capital invested is a little bit lower than I want. Those of you with GVI Investor will know that I look for that to be a bit higher… usually above 10% or 12%.

CROCI is a number from Goldman Sachs Wealth Management. Cash return on capital invested suggest a company might be, if it’s in the top quartile, able to generate more than 30% per annum. So this is a good number… but it’s not ideal.

You can learn more about CROCI here.

The Sortino, or the average return versus the downside risk of missing it, is 0.6. That’s fair enough. I like that number.

The volatility is low. Good. I don’t particularly like volatility.

BJ’s alpha, the ability to outperform the market, is strong. Good.

So where are we on the price charts?

Well, you can see on upward trends that drawdowns tend to be not too bad. Yes, they have something of a duration. It takes few months for them to recover, but it’s not too bad.

The MACD has rising momentum, so that’s good for me as well.

The stock has gone gangbusters over the last four years. It’s pretty much quadrupled in price. You might wonder whether there can be more to go.

Well, the growth pretty much justifies that.

It is still 30.9% undervalued on a discount cash flow basis. So again, pretty good going there.

So, thank you very much, and, hopefully, the stock looks like a good addition to a portfolio for you.

Thank you very much.