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A NEW ADDITION TO OUR LONG-TERM PORTFOLIO

Garrett Baldwin

 

This week in Flashpoint Trader, we went on a mission to find awesome investment
possibilities that'll shine in a world of high inflation and elevated Fed
interest rates. In such an economic climate, it's wise to focus on businesses
that produce essential products at low costs.

 


To determine which companies fit the bill, we're turning to the F score (the
Piotroski score). This nine-point system helps us size up how well a company's
management is doing by looking at how much money they're making from their
assets, whether they're buying back shares, and if their cash flow is improving.

 


Developed by finance professor Joseph Piotroski, the F score can help investors
identify well-managed companies with strong balance sheets. Meanwhile, a Z score
above three can offer further insight into a company's stability in the face of
potential credit crises.

 


When analyzing a company, consider its price-to-book (PB) ratio and aim for a
value of 1.1 or lower. Additionally, evaluate the company's Graham value, a
defensive metric developed by Benjamin Graham.

 


This week in Flashpoint Trader, a preliminary list of 16 companies was compiled
using these criteria. These companies manufacture essential products and are
often overlooked by investors who prefer to avoid certain industries. Examples
included KB Homes (KBH), HF Sinclair (DINO), Taylor Morrison (TMHC), and
Bridgford Foods (BRID).

 


Bridgford Foods, for example, is trading at a significantly low 0.31 times its
Graham number and has a Z score of 5.8, trading under book value. Investing in
this company could yield a 14% return if it were to be bought out or traded at
its tangible book value. As a food company, Bridgeford stands to benefit from
rising food prices.

 

FINDING DEEP VALUE: IN UNCERTAIN TIMES, LEARN HOW TO PROPERLY VALUE A BUSINESS
TO HAVE THE CHANCE TO BEAT THIS COMPLEX MARKET LANDSCAPE. CLICK HERE TO LEARN
HOW.

 

Small-cap value stocks like Bridgeford Foods can offer unique opportunities for
individual investors, as they often go unnoticed by institutional investors who
cannot invest large sums in companies with small market caps. These companies
can provide a solid foundation for an investment portfolio, especially if they
are involved in producing essential goods.


To further research these companies, review their financial reports and product
offerings. Bridgford Foods, for example, produces apple turnovers, wraps,
Italian-style camp sandwiches, and beef jerky sold at Walmart. These products
are likely to remain in demand even as food prices increase.


Finally, consider the trading options available for these stocks. While some may
not have liquid option chains, their patterns can still provide valuable
information for potential investors looking to trade funds or other players in
the space. 


Bridgford does not have an option chain, so we'll buy the stock low, around
$12.50, and sell at $14. With a solid balance sheet and low tangible book value,
just buy, hold, and repeat until the market recognizes its value. In an
inflationary food environment, BRID is a promising pick, especially in oversold
territory.

 



I'll explore some companies with higher trading volume and an options chain next
week, and use this list as my starting point. We’ll select two trades from this
list and then likely sell a covered call in Flashpoint Trader. I'd love to have
you join our community. Click here to learn more. 

 



 





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