Value Investing Still Works. That Doesn't Mean You Can't Be a Trader, Too.
Purchasing this stock following large pullbacks has been a proven recipe for outstanding gains. Let me show you how I've made a bundle trading it over the years.
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Regular readers of my columns know I am more of an investor than a trader. Buying when shares are ridiculously cheap and making huge gains normally involves holding for from one to three years.
The graphic below was from my TheStreet Pro article published July 20, 2020, during the height of thew Covid-panic period.
Caleres CAL was then trading for $7.42 per share, down 81.9% from a previous all-time high of $41.10 set in 2018. At the very worst of the panic it had bottomed at $3.12.
At its peak it took $41,100 to own 1,000 shares. At 2020’s dead low those same one thousand shares could have been picked up for just $3,120.
I bought tens of thousands of CAL back then, at an average cost of under $5. Many of those wound up in my Roth IRA account.
Why did I favor CAL so much at that time when everybody knew CAL would lose money in FY 2020?
All five immediately pre-Covid years saw Caleres post steady EPS ranging from $2.00 to $2.21. That is what I call “proven earnings power” of about $2.10 per share.
From 2011 through 2019 the stock’s average P/E multiple had run about 13.9x. At $7.42, CAL was offered at just 4.4x its normalized earnings power. That said to me that Caleres could rebound to at least about $23-$24 even if FY 2021 EPS only partially rebounded to Value Line’s estimate of $1.70.
CAL peaked between $32.30 and $41.10 during each of the six years stretching from 2015 through 2019 when EPS were about $2.10.
That made my July 2020 projected target price of $23.63 appear quite conservative.
As things played out FY 2021 saw CAL earn $4.29 per share. FY 2022 EPS climbed further to $4.92. FY 2023 (ended Jan. 31, 2024) saw a slight dip to $4.18.
Newly issued guidance for FY 2024 is now centered on about $4.00. That indicates Cal’s proven earnings power is now at least $4. That represents a near doubling of the firm’s pre-Covid level.
Applying a reasonable 13x multiple to this year’s estimate suggests that CAL could rise to about $52 without looking overpriced.
How have I made out with my CAL investment over time? I am glad you asked. Due to the stock’s high volatility I have taken numerous profits since 2020 while trading around my core position.
The numbers I am about to show you represent realized and unrealized gains on what my positions produced in calendar 2023 and during 2024 YTD. They do not include dividend income or gains on naked put sales or covered calls which expired or were closed out early.
I only sold CAL shares in my Roth IRA and my taxable account during 2023-2024. Those two accounts realized totaled net gains of $466,339.
Most of the sales shown above were due to smartly letting numerous August 16, 2024 expiration date covered calls be exercised last month while CAL was still near its all-time high.
I still hold CAL shares in both Traditional and Roth IRA accounts, including many shares purchased on Sep. 12, 2024. More on why I was buying last Thursday soon.
Unrealized gains in those IRAs totaled another $99,080 as of Sep. 13, 2024.
Unrealized gains in my margin account weighed in at $84,924. The unrealized gains for both IRAs and my margin account do include actively held calls and puts on CAL.
Total unrealized gains on all three accounts rang in at $215,427 on top of the realized gains taken since the start of 2023.
Caleres reported its end of July 2024 quarter results on Sep. 12. EPS were somewhat below estimates but still quite robust. Full-year guidance was trimmed from about $4.40 to $4.00.
Shares that fetched $44.51 on Aug 18 plunged to as low as $29.30 intra-day. On that news. Cal was off almost 25% just since Monday, Sep. 9.
At $29.30 per share, CAL was available at only around 7.3 times its already reduced FY 2024 estimate. Another small plus was that CAL was about to go ex-dividend the next day for a seven-cent quarterly payment.
CAL has now paid continuous cash distributions during each of the past 100 years.
Just before 1 p.m. on Friday, Sep. 13, 2024, CAL had bounced back to $32.68 plus the dividend now being earned and payable on Sep. 27.
Here is a graphic of CAL’s excellent trading opportunities from 2019 through 2022.
Caleres has been especially volatile in recent months. A YTD chart details four separate completed trading opportunities since the start of this year.
Thursday’s recent selloff should provide yet another great chance for quick gains.
Here is documentation for the stock’s year-to-date activity.
The four declines averaged (-23.6%) over about one-month. The four most recent rebounds averaged +36.6% in around 1.1 months.
Nimble traders could have pocketed 55% more on each advance than the stock gave up during its most recent four short-term plunges.
Purchasing CAL following large pullbacks has been a proven recipe for outstanding gains.
Pre-Covid, the stock ranged from $32-$41 on typical EPS of about $2.10. Shouldn’t it be worth much more now, with year-after-year EPS at $4 or better?
If so, owning Caleres under $32 looks like a no-brainer.
Two of my other footwear industry holdings, Designer Brands DBI and Wolverine Worldwide WWW are both hot right now as well.
From Thursday’s open through 3:15 p.m. on Friday, September 13, 2024 DBI was up over 15% and WWW had gained almost 10%.
Buy CAL now for both trading opportunities and substantial long-term gains. Generous premiums are available for shorting naked puts out as far as Oct. 17, 2025.
At the time of publication, price was long CAL shares, short CAL covered calls and CAL naked puts. He was long shares and short options on both DBI and WWW.
