🗞 The Math Behind Making 50% With ONE Trade

BREAKING THE DEAL
It’s All About Convenience

The consumer sentiment index is now near all-time lows, but a Fed survey shows a very clear trend happening right now.

Consumers aren’t worried about prices necessarily, but rather about the prospect of lower incomes.

Let’s get inside their heads for a minute and figure this out real quick:

• If I don’t care about price, but I’m worried about my income lowering, then all I really want is value/convenience

Then you have price action as a reminder, confirmation for this whole trend.

When you think of price benefits in the retail/wholesale sector, you probably think of Costco (COST) and Walmart (WMT) first, don’t you? 👀 

Yet, these stocks have underperformed the S&P 500 over the past month since the surveys began to reflect this theme.

More than that, here are a couple of other stocks you probably didn’t think of, which also outperformed these “value” plays:

• Target (TGT)

• Dutch Bros (BROS)

Convenience, not price, is driving the outperformance in these names. You can find a Target in more locations and on more convenient routes than a Costco. You can also get a much better (and quicker) service in the Dutch Bros drive-thru/pull-up model over Starbucks.

However, there is one company in the consumer sector whose management just made a HUGE shift.

We’re talking about a new way to make double-digit sales growth happen in the coming years.

There are also a few other attractive factors behind this deal:

• 12% EPS CAGR for the next 5 years on worst-case forecasts, 20% over the past 5.

• 40%+ gross margins with a new digital & store revamp to expand margins

• 20%+ ROIC set to expand on debt reduction & $4 billion plus buyback program

Here’s the most important part of all, and why I love this deal as part of our portfolio.

It commands a Forward P/E and P/FCF premium above all other names. I mean, this stock is beginning to trade like a tech stock, and it’s all because of a major shift happening in the business model.

Volatility is beginning to top as it nears a 52-week low, and a major demand zone is about to be hit. If you understand volatility, then you know this is EXACTLY where big whales buy.

Let’s break down why this play has over 50% upside built into it ⬇️ 

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