I was talking to somebody on here recently about convictions and long term plays and what to do when the market behaves irrationally (as it always does). On other parts of reddit here, you see a lot of gambling and growth stocks, and we've seen the effects of what happen when these stocks get dropped by the institutions and everybody starts to run scarred. The number of posts on Reddit from people down so much on their portfolios and the fear they have is understandable. They bought into hype companies that are very fickle when the growth even gives an inkling of drying up.

But what about companies that seems fundamentally sound? What do we do when our positions on those drop dramatically. At the beginning of the year, 1-800-FLOWERS (FLWS) got on my radar. Over the last decade, FLWS has maintained impressive growth over the last decade. Over 10% revenue growth consistently each year. Earnings is almost 20% year over year in the last decade. An impressive 15% year over year return on investment capital. Free Cash Flow from 27 million to 125 million in the last 5 years. I calculate their cash flow for owners to have grown about 589 million in the last 10 years over an increase in the same period of 148 million on long term debt. They are using debt and appear to be using it smart. There are questions about the business model they have and the moat surrounding it, but I think with FLWS, it's not so much a buy and hold play as it is a buy at a discount and sell when the market recognized its value type play. Very much a $.50 on the $1.00 play.

However, like all companies that sell tangible things right now, the pandemic and supply chain issues caused them to lower their guidance for the year from 10% revenue growth to 7-9%. And the stock tanked... hard. It was down 30% at open today.

However, even if we look at growth of earnings and imagine them increasing at just 5% year over year, in 10 years, we are looking at the potential of earnings per share going from 1.78 to 3.04. At a hypothetical PE of 10, this would be around $30. A PE of $15 would be $45. The stock is currently going for $15. At a minimum, I believe it's a 10% a year return. At a conservative good case scenario, It's around 15%. I think the potential is there to be even better.

I bought in around $20. I bought more today at $15. I think the market presented a great long term buy here based on short term issues outside of its control. And if my thesis is wrong and the company cannot continue to grow at even half the amount it's grown in the last decade, the last 5 being exceptional, then you are buying in at a good margin of safety.

Someone brought up FLWS here the other day. I think it's worth anybody taking a look at what the market presents to you.