The Panic-Proof Portfolio (Stockchase Research) Big Lots Inc BIG-N PAST TOP PICK Jan 28, 2021

It has been a roller coaster. We are in the lower end of the long term trading range. It had a little bit of a rounded pattern and then when it broke it, it had quite a move. So far so good.

A fun place to shop. Technically it has formed a strong bottom at $40. A recent bullish breakout has him interested. It could re-test $46, but expects it to fill the gap back up near $53 and would use $44 as his first stop. Yield 2.6%. (Analysts’ price target is $46.27)

BIG's small size ($141M) and debt ($2.3B) and losses ($180M last year) do make it very financially risky. Bloomberg calculates a 'default risk ratio' and it is 27.3%, about as high as we see on a company that has yet to restructure. The dividend was cancelled last week. Cash flow was negative $100M+ in the last year. Its last quarter was horrible. We think it is very precarious and the decline makes sense based on the risk. There is a 39% short interest, and it could see a short squeeze one day, but this is not something to count on. We would not want to own a very small company with more than $2B in obligations (mostly leases) and negative cash flow. 
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