Home Hedge Funds Is Goedeker (GOED) a Smart Long-Term Investment?

Is Goedeker (GOED) a Smart Long-Term Investment?

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Artko Capital, an asset management firm, published its first-quarter 2022 investor letter – a copy of which can be downloaded here. For the first calendar quarter of 2022, an average partnership interest in Artko Capital LP was down 11.4% net of fees. At the same time, investments in the most comparable market indexes—Russell 2000, Russell Microcap, and the S&P 500—were down 7.5%, 7.6%, and 4.6% respectively. Try to spend some time taking a look at the fund’s top 5 holdings to be informed about their best picks for 2022.

In its Q1 2022 investor letter, Artko Capital mentioned  1847 Goedeker Inc. (NYSE:GOED) and explained its insights for the company. Founded in 1951, 1847 Goedeker Inc. (NYSE:GOED) is a Missouri-based online retail company with a $129.7 million market capitalization. 1847 Goedeker Inc. (NYSE:GOED) delivered a -49.17% return since the beginning of the year, while its 12-month returns are down by -63.36%. The stock closed at $1.22 per share on June 20, 2022.

Here is what Artko Capital has to say about 1847 Goedeker Inc. (NYSE:GOED) in its Q1 2022 investor letter:

“We acquired an 8% position in the warrants of 1847 Goedeker Inc (NYSE:GOED) at an average cost of $0.62 starting in late December 2021 and are continuously adding throughout 2022 to lower our price average. We are very excited about this investment and think the market has given us a fantastic multi bagger opportunity.

Our investment in GOED, a high growth appliance e-commerce company, is very reminiscent of our investment in HireQuest (NASDAQ:HQI) where a large, successful private company merged with a substantially smaller and underperforming but public competitor. In the case of HQI, it merged with a $20mm market cap competitor Command Center and it took a while for the market to realize that the new company is a Free Cash Flow (FCF) generating machine led by an industry veteran and it was no longer the company represented by its historical numbers. GOED is not dissimilar as it was a small, $50mm revenue run rate, and on the verge of bankruptcy company that merged with a substantially larger competitor, Appliance Connection, in 2021. The combined company is expected to generate close to $650mm in revenues and close to $65mm/$55mm in EBITDA/EBIT in 2022, growing revenues by over 20%, despite an incredibly challenging economic environment. This was again reaffirmed on the company’s most recent earnings call in May. Despite all this, at the end of the quarter the company, at a ~$1.40 stock price, sported a market cap/enterprise value of $150mm/$170mm or 2.3x/3.0x EBITDA/EBIT, an absurdly low price implying bankruptcy or an imminent consumer collapse. Given that Bank of America just approved a $140mm lending agreement to the company, the size of its entire market cap at the time, and unlike furniture, most appliance purchases cannot be deferred (try going without a refrigerator for a few weeks) we find the aforementioned scenarios highly improbable.

So, what makes GOED (or Appliance Connection) so special?..” (Click here to see the full text)

appliance, arabica, aroma, aromatic, beverage, black coffee, black coffee mug, blend, blender, boil, boiler, breakfast, brew, cafe, caffeine, cappuccino, coffee, coffee blender, coffee maker machine, cup, drink, espresso, food, handle, heat, home appliances, hot, hot drinks, jar, kitchen, kitchenware, latte, machine, maker, mellow, metal, milk, mocha, modern, mug, pot, restaurant, roasted, robusta, seed, smell, snack, steel, taste

appliance, arabica, aroma, aromatic, beverage, black coffee, black coffee mug, blend, blender, boil, boiler, breakfast, brew, cafe, caffeine, cappuccino, coffee, coffee blender, coffee maker machine, cup, drink, espresso, food, handle, heat, home appliances, hot, hot drinks, jar, kitchen, kitchenware, latte, machine, maker, mellow, metal, milk, mocha, modern, mug, pot, restaurant, roasted, robusta, seed, smell, snack, steel, taste

Copyright: johnkasawa / 123RF Stock Photo

Our calculations show that 1847 Goedeker Inc. (NYSE:GOED) fell short and didn’t make it on our list of the 30 Most Popular Stocks Among Hedge Funds. 1847 Goedeker Inc. (NYSE:GOED) was in 15 hedge fund portfolios at the end of the first quarter of 2022, compared to 16 funds in the previous quarter. 1847 Goedeker Inc. (NYSE:GOED) delivered a -28.65% return in the past 3 months.

In February 2022, we also shared another hedge fund’s views on 1847 Goedeker Inc. (NYSE:GOED) in another article. You can find other investor letters from hedge funds and prominent investors on our hedge fund investor letters 2022 Q1 page.

Disclosure: None. This article is originally published at Insider Monkey.

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