Never Heard of BGCP? You Should. It Shows Huge Upside Potential

Few retail investors are aware of BGC Partners as it deals strictly as a business to business service provider. The company's own description explains what it does. BGCP's obvious claim to fame is its spin-off from Cantor Fitzgerald, a company unlucky enough to have taken a direct hit at NYC's World Trade Center tower during the 9/11 attacks. The stock took a huge hit during the March to April 2020 market plunge, diving from $6.15 to a monetary nadir of $2.07. Since bottoming in April, BCGP got as high as $3.29 on Jun. 8th, a quick 58.9% rebound. Like many stocks, BGCP has slipped back since last month's peak. On July 7 it closed at $2.49. BGCP is typically a low price-to-earnings stock. From 2013 through 2019 it typically fetched about 11.8-times earnings while yielding 7.10%. Management chose to reduce quarterly payments to just a penny per share pending resolution of the uncertainty related to the Covid-19 crisis. At today's price, the reduced yield still provides a 1.62% yield. Higher payouts are likely to be re-instituted before too long as earnings per share are holding up reasonably well. Most of BGCP's previous payout ratios ran between 50% and 70%. Assuming a lower than average 10-times multiple on this year's earnings estimate supports an end of the year goal price of $6. Achieving that realistic goal would deliver a greater than 140% gain. That target is not far-fetched. BGCP topped out at $6.15 during January of this year and hit $6.40 in 2019. Independent research house Morningstar calls BGCP's present-day fair value as $3.65, implying immediate upside of 46.6%. Yahoo Finance is even more bullish on BGCP that I am. It carries a 12-month target price of $8. I think that is a bit optimistic. Getting back to $8 would require the shares to command 12.1-times forward EPS, a bit higher than its historical average multiple. Extending holding periods past one year looks equally good. Value Line's 2023 - 2025 projected price range extends from $6 to $10. The top end of that range represents a quadruple from BGCP's July 8 quote. Note that the figures shown were calculated with BGCP at $2.75. They need to be adjusted higher from the current sub-$2.50 price point. Option sellers willing to own BGCP even cheaper can short Feb. 19, 2021 expiration date puts using $2.50 or $5.00 strike prices. Actual pricing, with BGCP at $2.49, are shown below. Worst case, forced purchase would only come at either $1.95 or $2.10 per share. That means sell-offs of up to 15.6% or 21.6% from the trade inception price could be absorbed without a loss. Owning BGCP at $1.95 would have been a winning position 100% of the time dating back more than two full years. The shares bottomed at $2.07 in early March before bouncing right back to $3.29 by June 8. 2020 is not the first time BGCP plunged, giving traders the chance to buy in really, really cheaply. During the 2008 to 2009 crash, BGCP fell from $12 to under a dollar. Smart and lucky buyers at that low point then saw two-year gains exceeding 950% by March of 2011. BGCP is not a blue chip name. It is not a bet the farm type of stock. It is, however, a tempting choice for those willing to bet on a comeback which could reach well over 100%. Buy some shares, collect the 1.6% yield, and wait for the next good rally. Once BGCP starts rising, there will be attractive covered call premiums available to provide extra income. I also expect a much higher quarterly dividend rate to be in effect before too long. Selling puts while the shares remain depressed is another good way to garner up front income. Barring truly bad news the $2.50 puts are likely to expire worthless. Writing the $5 strike puts allows for much larger gains if the stock rebounds sharply by next February.

Never Heard of BGCP? You Should. It Shows Huge Upside Potential

BGC Partners is not a blue chip name, but it is a tempting choice for those willing to bet on a comeback that could reach well over 100%.

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