My high conviction long trade (GOED)

23 thg 12, 2021

My high conviction trade (GOED)

Hello everyone, I want to share with you my research into 1847 Goedeker which trades on the NYSE under the ticker symbol GOED. The current price is 2.67 and the market capitalization is 283.5 Million dollars.

Disclaimer

I am sharing my personal views into this stock; I am not making suggestions that you should buy or sell. Everyone is responsible for their own profits and losses when trading in the stock market and I am not responsible for your trading decisions.

This is the company’s website:
goedekers.com/

What do they do?

They operate an online e-commerce platform and sell appliances and furniture in the United States. This includes kitchen appliances, washers and dryers, fitness equipment, pluming, TV’s, outdoor and patio furniture as well as commercial appliances for builder and business clients. They also provide installation services and removal services for old appliances.

Goedeker is essentially the online appliance and furniture store. Think of the classical furniture store, Goedeker arrangers for installation and removal services; but also think of an E-commerce such as Amazon, people can buy the stuff online.

*GOED would not be in direct competition with Amazon, which is important for us, more on that later.

More on the brand

GOED is trying to perfect their ability to sell appliances and furniture online, then deliver them to the customer as quickly as possible. This is a very difficult undertaking, as it is not easy to deliver furniture to people on a grand scale. However, there are lucrative opportunities that lay here for the company that is able to do this well.

I went through their website, I noticed that they sell the absolute best brands. The variety is omnipresent, and customers would not have to settle for something they don’t like or prefer.

The brands at the store include (Fisher and Paykel, Forte, LG, Maytag, and so on.) The variety of products they offer and the furniture they have is great.

They also offer free shipping on appliances that are $499 or higher as well as most furniture items.


Competition

1847 Goedeker has a variety of competitors, these include companies such as WW International, Imax, Real Real, American Woodmark and other speciality fitness retailers such as f45 and Xpof.

I will be completely honest, I had not researched the competitors in this space, I focused primarily on Goedeker. There are three things that are very noteworthy in my opinion.

1) Non of the online e-commerce retailers that compete with goedeker are particularly threatening, or with serious advantage. Although this could be said for Goedeker (more on this later).

2) Goedeker is not in competition with Amazon, and this is very important.

3) Goedeker has undertaken to expand by means of acquisition and they are getting their hands on anything and anyone who has expertise in how to deliver appliances and furniture to people quickly, and they are getting better at it, quickly.

Although one of the concerns I have is that Goedeker may be in competition with Ikea, I think the devil is in the details.

Ikea always has been a brick-and-mortar store, which has the ability to sell products online. Here in Canada, Ikea is spread out into the major cities and the warehouse is in and within the retail store. A lot of their deliver and assembly services are outsourced.

Goedeker has no brick-and-mortar stores but have the advantage of better real estate for warehousing purposes. For an example, Ikea needs to be located at strategic locations, accessible to the public and each store is very large, as customers would walk in and be able to see everything.

Roughly speaking, each Ikea location is large enough to fit some 6 warehouses had the public not had access to go inside.

Amazon, so far, has not been involved in delivering large items such as appliances, I think those items are far too big to store and deliver and may not fit into what Amazon is interested in doing.

The barriers to entry into this business are large, it needs significant capital as well as lots of warehousing and strategic partnerships. The logistics of delivery and installation are not easy to contend with. But the opportunity for the emerging victors can be nice.






Performance

I want to source a relevant article as well as Goedeker’s most recent financial report here

businesswire.com/news/home/20211115005708/en/

and

d18rn0p25nwr6d.cloudfront.net/CIK-0001810140/96dbef42-0815-44a2-ac41-f2974c54e54d.pdf


“Third Quarter
• Net sales were $141.9 million, compared to proforma net sales of $102.2 million for the third quarter 2020.
• Gross profit was $31.4 million (22.1% margin), compared to proforma gross profit of $21.0 million (20.5% margin) for the third quarter 2020.” (businesswire)

“Year to Date
• Proforma net sales were $405.0 million for the nine-month period ended September 30th, compared to $260.4 million for the same period in 2020.
• Proforma gross profit was $96.1 million (23.7% margin) for the nine-month period ended September 30th, compared to $52.4 million (20.1% margin) the same period in 2020.”

“Third Quarter
• Net sales were $141.9 million, compared to $13.4 million for the third quarter 2020.
• Gross profit totaled $31.3 million, compared to $2.2 million for the third quarter 2020.
• Net income was $3.3 million, or $0.03 per diluted common share, compared to a net loss of $4.2 million, or -$0.74 per diluted common share, for the third quarter of 2020.
• Cash and cash equivalents of $27.2 million, excluding $8.0 million in restricted cash.”

“Business and Strategy Highlights
• Announced the appointment of Alberti Fouerti as Chief Executive Officer.
• Began adding new talent to support the Company’s ecommerce strategy, including individuals with experience in analytics, marketing, merchandise and supply chain initiatives.
• Began working with an independent consultant to align executive compensation with the Company’s future performance.
• Established plan to roll out the Company’s new brand during the first half of 2022.
• Established plan to add multiple fulfillment centers in strategic locations during the first half of 2022.
• Initiated an evaluation of strategies for optimizing the Company’s capital structure following this year’s warrant issuance.
• Shared an overview of the Company’s ecommerce strategy for achieving growth and greater market share, and outlined the priorities that include:
o Maintaining a best-in-class technology stack and digital marketing presence;
o Offering expansive product selection;
o Having competitive pricing;
o Consistently providing fast and reliable shipping, and;
o Delivering stronger expert-level customer service.”

Recent news and insider buying

This is perhaps the most important of all my due diligence, this is the part that gets me excited.

Timeline:

September 15, 2021:

Albert Fouerti, Chief Executive Officer at 1847 Goedeker, made a large insider buy, he purchased 330,000 shares of 1847 Goedeker at a price of $2.95 per share


December 13, 2021:

Albert Fouerti purchased 458,876 shares at an average price of 2.18


December 21, 2021:

“ST. CHARLES, Mo., December 21, 2021--(BUSINESS WIRE)--1847 Goedeker Inc. (NYSE American: GOED) ("Goedeker" or the "Company"), one of the largest specialty ecommerce players in the U.S. household appliances market, today announced that its Board of Directors (the "Board") authorized a new share repurchase program under which the Company may repurchase up to $25 million of its outstanding shares of common stock in the open market, in accordance with all applicable securities laws and regulations, including Rule 10b-18 of the Securities Exchange Act of 1934, as amended. The Company’s decision to repurchase its shares, as well as the timing of such repurchases, will depend on a variety of factors that include ongoing assessments of the Company’s capital needs, obtaining requisite senior lender consent, market conditions and the price of the Company’s common stock, and other corporate considerations, as determined by management. The repurchase program may be suspended or discontinued at any time.

Albert Fouerti, Chief Executive Officer and Director, commented:

"Now that we have begun implementing a clear strategy focused on ecommerce growth, our leadership has been able to establish an accretive capital allocation philosophy. In addition to prioritizing investments in talent, technology and our fulfillment capabilities, we want to be able to buy back shares when our own financial position and market conditions permit. The Company’s decision to authorize a share repurchase program at this time should signal the conviction that our Board and management have in the Company’s strategy. While our primary emphasis will remain on building a long-term foundation for a category-leading business, we intend to be decisive when there are opportunities to enhance stockholder value and make good on our commitment to strengthen the Company’s capital structure. I am confident in this approach as a sizable stockholder and given my family’s sizable holdings.1"”

finance.yahoo.com/news/1847-goedeker-insider-makes-972-143456238.html
finance.yahoo.com/news/1847-goedeker-inc-goed-ceo-141502916.html
finance.yahoo.com/news/1847-goedeker-inc-announces-share-133000074.html


Final notes

I have faith that Goedeker’s is hiring the right people and making the right acquisitions the position itself as a great company.

I have a position now and planning to hold for 2-5 years.

I am going to continue to watch the company and earnings over time.

I think the insider buying, as well as the execution of the company’s stock re-purchase program are going to layer in phenomenal levels of support for this companies stock price.

11 thg 1, 2022

Ghi chú

I created a Youtube video for this trade

youtube.com/watch?v=RSK94zD5-3k&ab_channel=TSXTrader

12 thg 1, 2022

Ghi chú

Changing my mind on Goed

I had originally been more bullish on Goed, but I had spend the last few days researching it, and I am no longer bullish on it, but rather neutral.

I am cutting my long term position for now, And would be interested in Goed only from a speculative mispricing perspective. For an example. prices near all time lows such 1.70 to 1.90 may represent a mispricing opportunity as the most recent share offerings and warrants are priced at 2.50.

Additionally, some money can be made in mispriced shares, for an exmaple, buying at 1.90 on a speculative basis and selling at 3.00 is lucritive, specially when the swing in price takes lesser than 6 months.

From a risk management perspective, you should limit your exposure by purchasing in smaller sizes.

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My concerns following more research is as follows:

Very significant price dillution with many bag holders at the $11, $9, and $2.5 levels as well as outstanding warrants at 2.50 for 5 years and at 9 and 11 respectively for 10 years. This will create overhang for the stock price.

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- US Household appliances market is expected to grow at a rate of 1.3% from 2021 – 2025
- 42% of appliances are sold online in 2021, and this is expected to go up to 45% in 2023

The growth of 1.3% expected over 3 years is not significant, and the 3% growth in online appliances purchasing is not significant, specially where competition may be fierce.

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GOED is highly dependant on one supplyer for a large portion of their sales:

"Our dependence on one supplier for a substantial portion of our purchases makes us vulnerable to a disruption in the supply of its products. We rely on Whirlpool for a substantial portion of product purchases. For the years ended December 31, 2020 and 2019, approximately 38.0% and 44.1%, respectively, of our total purchases were from Whirlpool."


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The company itself belives it is vastly undervalued at these levels, so I may be totally wrong, but I am not seeing growth that will create significant returns in this buisness, and I am worried about their need to raise capital again, further diluting share prices.