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Insider Buying at Two Retailers Signals Opportunity

Bret Jensen sees potential bargains in Designer Brands and 1847 Goedecker.

(Executives are buying up shares of two retailers that are also bargains for investors, Real Money’s Bret Jensen argues.) - Get Designer Brands Inc. Class A Report

“I'll look at two possible bargains in the retail sector that recently came on my radar screen thanks to significant insider buying in these stocks,” he wrote in a recent Real Money column. The companies are retailers 1847 Goedeker Inc. GOED and Designer Brands  (DBI) - Get Designer Brands Inc. Class A Report.

An e-commerce destination for appliance and furniture, 1847 Goedeker, reported positive second-quarter earnings that both beat top-line expectations and pro-forma revenue that increased over 50% from the same period a year ago.

The company promoted its president to CEO in August and he bought almost a $1 million of 1847 Goedeker’s stock in mid-September. The company’s future looks promising, Jensen argues.

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“Add in sales growth to a strong balance sheet and the record quarterly profit the company just posted for the second quarter and there is still a lot to like about this story,” he wrote.

Another retailer that investors should consider is Designer Brands, an Ohio-based manufacturer and retailer of footwear and accessories that operates over 650 stores. After being forced to close its brick and mortar stores in both the U.S. and Canada during the lockdowns that occurred because of the pandemic, the company revamped its e-commerce division. Designer Brands pivoted and fulfilled orders in two to three days compared to its previous five to seven days.

Before the lockdowns began, the company had several positive factors going for it -- a solid balance sheet and the suspension of buybacks and its quarterly dividend to preserve cash. The near term outlook for Designer Brands looks positive.

“With Designer Brands approaching fiscal 2019 net sales and earnings levels and generating significant cash, the bet here is it will return to paying a dividend (subject to its credit facility restrictions) in the next six months, which should give the stock a shot in the arm,” Jensen wrote. “Its executive chairman seems to be signaling better times are on the horizon, purchasing about $20 million of shares in mid-September.”

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