Disclaimer: None of this is investment advice. The logic here may be bad and should not be relied upon. My assumptions may be bad and should not be relied upon. This post reflects my opinion. I may hold positions in securities I write about, and I believe in what I write.
I first bought Big 5 Sporting Goods back in December 2021. And I’ve bought several dips since.
My view of BGFV is that it’s great. I am confused at the massive short position, and I haven’t found a good explanation for it.
My experience throughout my life about Big 5 is that the products aren’t as good as what you’d find at Sport Chalet or Sportmart. The draw of Big 5 was that it was nearby and good enough for some things, I guess.
My family isn’t and hasn’t been into guns offered by Big 5, but we’d certainly see them and other products in the fliers that Big 5 sent out.
The thing that I remember most vividly about Big 5 Sporting Goods from my childhood is the shoe department. Or area. Or whatever.
It wasn’t massive aisles of boxes like at Sportmart or a nice area like at Sport Chalet where there were shoes on display and salespeople who brought you your size. Rather, it was a wall of shoes like normal plus some low shelves with kinda random boxes. But the prize was the table piled high with mismatched footwear. Mismatched because the shoes were bound together, but frequently the mated shoes were different sizes.
Throughout the years, I wondered how Big 5 stores continued to operate when there were plenty of good options out there.
I found myself going to Big 5 to get a wooden Louisville Slugger for $25 or some baseballs or golf balls. Once I got a driver there because the one that had come with my starter set of golf clubs wasn’t great. But after hitting a few balls at the range, the head came off. It also made a weird sound. I returned it.
Later, I bought some weights at Big 5 because the prices were fine, and weights are weights. Not much complexity.
I wanted to get some 10# plates, but they only had 5# and 2.5# plates. I got four 5# plates instead of two 10# plates. As I stood in line in the store cluttered with items that had been delivered but not yet put on shelves, I wondered why I’d gone to such a lame store. Then I realized that I was in line. Behind seven people. Why was any of us there? Selection? No. Store design? No. Prices? I don’t know if it was enough to make a difference. Convenience? That had to be it. Or maybe it was a supernatural draw. Like the name. Big 5. Not as funny as Dick’s, but that was OK because I hadn’t heard of Dick’s yet.
Sport Chalet closed in 2016 after filing for Chapter 7 bankruptcy protection, which is the one where pretty nobody who is owed money gets anything and the company is dead. Sportmart was purchased in 1997, and the name disappeared in favor of Sports Authority–a brand then-unfamiliar to this Los Angeles kid–in 2005. And then in spectacular fashion, Sports Authority also closed in 2016 after filing for Chapter 7 bankruptcy protection.
Big 5 avoided that somehow, which I also found to be strange. Like, why?
Now, switching from bewildered consumer perspective to admittedly equally bewildered investor perspective, all that’s changed is my belief in the company’s ability to survive.
In October 2021, I started to look to see if there was any reason to buy BGFV. I thought I might as well buy some shares because the dividend looked pretty good, but I got sidetracked and was focused more on my Devon Energy shares anyway. So I was on the sidelines watching as the stock doubled in price in November.
On its way down in December, I started to pick it up. There was a cycle of: It drops down to $17 and goes back to $19 or goes to $16 then back to $19. Over and over. Weird, sure. So I bought dip after dip.
There were two convincers for me: Reading the financial statements and seeing how much of the company is shorted.
In the financial statements, Big 5 basically describes itself as a company that takes opportunities to relieve other merchants of dead inventory and provides them to consumers who have low expectations. The low expectations part is my inference from the text combined with my own surprisingly (to myself) numerous experiences going to different Big 5 locations never finding the store layout or design or lighting to give me high hopes. And the only time I’ve been disappointed enough to take action was with that poorly made golf club. Everything else has been good enough.
Here it is in their words. See if you get the same message.
We believe we enjoy significant advantages in making opportunistic buys of vendor over-stock and close-out merchandise because of our strong vendor relationships, purchasing volume and rapid decision-making process. Our strong vendor relationships and purchasing volume also enable us to purchase merchandise produced exclusively for us under a manufacturer’s brand name which allows us to differentiate our product selection from competition, obtain volume pricing discounts from vendors and offer unique value to our customers. Our advertising highlights our opportunistic buys together with merchandise produced exclusively for us in order to reinforce our reputation as a retailer that offers attractive values to our customers.
https://www.sec.gov/ix?doc=/Archives/edgar/data/1156388/000095017022002646/bgfv-20220102.htm
Big 5 also has like no debt. And their dividend is massive. And they’ve been making money. I’ll go into all that in future posts.
Am I stoked that it has bounced back to $11.72 as of this writing? Sure! Is my average cost about $15? Yes it is!
I can’t help but be enamored with this company and its stock.