BSET - Real-Time VBR Buy Signal: Bassett Furniture (Technical Analysis)

• Bassett Furniture, with 97 U.S. retail stores, and goods sold through various channels, is one of the oldest furniture makers in America.
• My proprietary momentum formulas are signaling an imbalance of buying vs. selling in the stock now exists.
• A massive cash position means investors are getting the company's business operations at incredibly low upfront values.

As many of my regular readers know, I have started a review of the strongest high-volume momentum picks at the end of each trading week, called the " Volume Breakout Report ." If you want to acquaint yourself with what my proprietary momentum formulas can do for portfolio selection, and are searching for some fresh picks using my tools, please start by looking over my July 9, 2022 update here .

This article will focus on a new VBR choice, hitting a second buy signal since June on Tuesday, Bassett Furniture ( BSET ). While my outlook for furniture sales is not overly optimistic, as home furnishing cycles in demand/sales follow closely with the health of the real estate market (which is topping this summer from the biggest exponential jump in mortgage rates since the 1970s), an asset sale and huge cash hoard should protect BSET shares from a serious downturn. Regardless of macro forecasts for the industry, Bassett could still experience a nice bump in price by the end of the year, as the operating business is available for peanuts, after subtracting the cash position.

I recommend anyone interested in buying Bassett read the excellent breakdown of company fundamentals by Seeking Alpha contributor Value Investment Principals in their bullish April report here . Below are the highlights taken from that article, with their bullish analysis at a price of $17 per share.

In fact, the company has so much cash it paid a large $1.50 dividend earlier in 2022 (on top of a share buyback program), and just yesterday increased its regular quarterly dividend to $0.16 (good for a rough 3% forward cash yield). Needless to say, the stock has risen nicely since May, sharply outperforming a sinking U.S. equity market.

While analysts are expecting income generation to flatline after 2022, EPS estimates remain at a level equivalent to a P/E of 10x (about half the S&P 500 average of 20x). Taking the massive cash position out of the equation for business worth, the EV to EBITDA multiple sits at an insanely low 2.87x (against 15x for the same S&P 500 average ratio) and ratio to sales at 0.24x (S&P 500 above 3x). Both are near 5-year lows, approximating the blowout pandemic panic selling bottom of 2020.

Volume Breakout Report Signals

Below is a basic 1-year chart highlighting some of the price, volume, and momentum changes over the last 3-4 weeks for Bassett Furniture. High volume buy days and serious price strength vs. the S&P 500 are noteworthy. I track around 15 different indicators of momentum in many of my formulas daily (each has a slightly different design, in an effort to scoop up as many serious buy candidates as possible), with the best results listed at the end of each trading session. Bassett is scoring near the top of one of my favorite creations.

Final Thoughts

In the end, Bassett appears to have a strong foundation of fundamental value to build upon, with a screaming amount of buying taking place in June-July. I am projecting outperformance of the market will continue for at least another 4-8 weeks, using historical averages of my research results and personal trading experience.

Seeking Alpha computers agree with my view and analysis (which is not always the case). The Quant Ranking for Bassett is incredibly high on July 14, 2022. SA puts a top 1% rating on Bassett for operating earnings growth and share price momentum, compared to a universe of over 4,600 equities.

Again, the primary risk owning Bassett Furniture today is more macro-related, as the odds of recession are high in America during 2022. If I had any confidence in the economy's direction, with consumer spending remaining robust, a $35-40 price target would be well within reach over the next 12-18 months. Conservatively speaking, I think a $30 quote, with a 3% dividend yield, will outline a total return closer to 40% by next summer for smart, patient investors. Downside is likely limited to $15 in a deep recession, with the cash holdings serving as an important backstop for valuations. So, we have best-case scenario potential return of +60% (using $35 for a quote) vs. a worst-of-all-worlds forecast of -30%. If you can pick shares closer to $20 in coming weeks, the upside/downside proposition would be even better.

Thanks for reading. Please consider this article a first step in your due diligence process. Consulting with a registered and experienced investment advisor is recommended before making any trade.

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