I recently have started doing some more work looking at long term trades – five year investments. While I do love and have had success with short term trading, I also am learning more about long term investing, how to use discounted cash flows, and other long term investing strategies. I have been working and am ready to present today my first major long term report on Big Lots Inc. (BIG). This company is one that I think has lots of potential. I have given the company a fair value estimate, an entry level, and exit level. Now, I don’t know that this trade is useful today; however, I think in reading through it and asking questions we can learn more about long term investment strategies. Hopefully, I can develop my long term skills, as well, and I can offer you more from this service.

Here is the report:

 

Profile: As of the beginning of 2009, the company operated 1,339 stores in 47 states. The company operates as the largest broad line closeout retailer in the USA. Big Lots offers products in the food, health and beauty, plastics, paper, chemical, pet supplies, home decorative, furniture, electronic, tools, home maintenance, seasonal, toys, infant accessories, and apparel lines. The company is headquartered in Columbus, Ohio.
 
 
Thesis
 
With the economic downturn and new management in 2005, Big Lots over the past several years has begun to gain market share, increase profitability, and carve out its own niche in the discount store market. The shopping center has seen an influx in its income and free cash flows, which has begun to attract investors to the company. As of recent, the stock has increased at rapid rates with successful quarters. The question for Big Lots, though, is whether or not the company can keep it going. The company has been able to produce consistency in its revenues since Steven S. Fishman took over as CEO and President in 2005, which was rather non-existent prior to his arrival. Additionally, the company has redefined its business, focusing on developing new markets with higher-income residents and smaller stores, increasing its brand name during the economic downturn, and focusing on long term growth by increasing efficiency and margins.
 
The company, though, does face rigorous competition from three sides. It loses market share from the smaller, dollar-store competition, seen in Family Dollar, Dollar Tree, and Dollar General. It faces competition from wholesalers that offer discounted…
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