Stocks A to Z / Stocks B / Berkshire Hathaway (BRK.A)
No. of Recommendations: 0
In September 2023, per Jim's rec, I purchased a ladder of DG call options expiring in 1/25.
Strike prices are 120, 140, 160, and 180 and all have done quite well.
I am considering:
1. Closing the options in September 2024 after a year to avoid short term cap gains taxes.
2. Exercising the options in 1/25 and keeping the stock long term.
3. Selling the options now
I know a large part of that depends on what one's thoughts are long term for the stock.
I have a decent amount of the common already which I am comfortable holding.
Overall DG isn't a large % of my portfolio so no concerns about overweighting.
Thoughts?
P.S.: Thanks Jim
No. of Recommendations: 0
I have similar DG options & expiry with strikes of 85 and 100 & a small position of the stock. My plan is to do #1 and reassess in 9/24, but leaning towards selling only the options then. Seems like things are slowly improving with DG and mgt but huge room for further improvement.
No. of Recommendations: 0
FWIW a few min ago I sold my remaining Jan'25 $195 calls, meaning the price will continue to rise - - - as always when I sell something.
No. of Recommendations: 1
I’m holding my 65 strike January 2026 options. My remaining contracts were put into straight stock.
I have no thoughts on the short term but long term I think DG can continue to grow revenue and store count, and will generally benefit from the shift to groceries over dining out. I’m still hopeful margins will get close to their 2015-2019 range (before the COVID explosion) once the macro environment gets a little better for their core consumer, and once costs of shrink & debt service start to come down.
I’m a bit surprised at the amount of leverage others are using.
No. of Recommendations: 13
I have little idea about the tax consequences, as I'm not a "US Person", so I can't comment on that.
As for the stock price itself, my official theory is a price target of $220. (e.g., 20 times EPS $11 some day, or some similar combination).
With absolutely no idea how long that will take : )
With today's price of $159, that notion suggest that there's a lot of profit yet to be made.
The price could hit $80 again before it hits $220, of course. Who knows?
Interesting article in the FT today about how retailers have stopped using organized retail theft (gang shoplifting) as an excuse for margin problems, so the narrative might shift. Starting in late 2022, mentions of theft shot up 80 per cent on earnings calls. But industry wide US shrink in 2022 at around 1.6% was no higher than in 2019.
"Much of the kerfuffle now appears to be rooted in loose talk from retail executives who needed a scapegoat for falling profit margins, amplified by overheated commentary and politicians eager to look tough on crime."
Jim
No. of Recommendations: 10
I’m a bit surprised at the amount of leverage others are using.
You probably mean me, as I wrote that I just sold Hershey $195 Jan'25 calls = far out the money. The explanation is easy: That's gambling, not rational investing. No problem, as I am fully aware of that. The outcome is not exactly great:
- 2022 my "casino/options portfolio" (was then on average 8% of my total portfolio) returned 19%
- 2023 (was then 5% of my portfolio) it returned just 3%
So double the 10% the S&P gained over those 2 years --- but absolutely not worth it if taking into account the immensily(!) higher risk I took with always deep out of the money options. The real reward was the fun I had.
No. of Recommendations: 4
From an article in The Guardian [access free, subscription requested]:
"99 Cents Only discount chain to close all US stores"
...Even as 99 Cents Only and Dollar Tree have struggled as dollar-store brands, Dollar General, the largest of the discount-chain companies, has heavily expanded its presence in recent years. The company announced in February that it had opened its 20,000th store, with plans to open 800 new stores this year.
Analysts have said the dollar-store brands have had different strategies over the years, with Dollar Tree focused on more urban populations while Dollar General focusing on more rural areas of the country where there are fewer competitors."
:-)Shawn
