(List compiled by Andrew Dominguez. Data sourced from Finviz and Schaeffer’s.)
Markets are volatile and will probably continue to be unpredictable in the near-term. In this climate, risk-averse investors may find it quite difficult to make any surefooted decisions.
Financial institutions are regrettably exposed to tons of souring Eurozone debt, while flagging consumer confidence and a weak job market are weighing down corporate profit forecasts across many sectors. Meanwhile, harried investors are retreating from equity markets and piling into the “safest” investments, namely US Treasuries and gold.
With these considerations in mind, let’s turn to articles by Mark Krieger of SeekingAlpha and Bill Barnhart of YCharts, both of which examine the grocery store industry.
Mr. Krieger expects supermarket stocks to bounce back after steep sell-offs this week and last. One of his three recommendations, SUPERVALU Inc, actually hit a 23-year low in trading the other day.
But sell-offs mean cheap stocks. And in his article, Mr. Krieger seems quite attracted to low 2012 earnings multiples for SUPERVALU, Safeway, and Kroger; price levels close to 2009 lows for SUPERVALU and Safeway; and positive dividend yields, particularly SUPERVALU’s 5.2% yield.
Mr. Krieger’s bottom line: “Calling the bottom on this basket of stocks is way too hard, being akin to trying to catch a falling knife. Sooner rather than later they will bounce back, and with vengeance…”
Mr. Barnhart also chooses to examine Safeway and Kroger, and adds Whole Foods. He believes that falling fuel costs will ease pressure on cash-strapped consumers who will then be able to spend more at the supermarket, particularly at Safeway and Kroger, both of which boast broad customer bases. Earnings and valuations also seem stable for Safeway and Kroger, according to YChart’s tools.
Mr. Barnhart points out that Whole Foods is different in one important aspect: it markets higher-end products and attracts a “more upscale customer base that is less sensitive to price increases” than the other two supermarkets. As a result, revenues at Whole Foods may be less prone to economic and oil price fluctuations. Whole Foods also boasts “steady annual gains in annual revenue,” adds Mr. Barnhart.
Mr.’s. Barnhart and Krieger both touch on interesting ideas: cheap stocks, dividend payments, and the effects (or lack thereof) that oil prices have on supermarket revenues.
For an alternative set of investing ideas, we decided to look for grocery store companies with bullish options sentiments. Are you similarly optimistic about these stocks?
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List sorted by percent change in put/call ratio over the last ten trading days.
1. SUPERVALU Inc. (SVU): Market cap of $1.52B with a dividend yield at 4.90%. Put/call ratio has decreased 26.23% over the last ten trading days (from 1.83 to 1.35).
2. Whole Foods Market, Inc. (WFM): Market cap of $9.8B with a dividend yield at 0.72%. Put/call ratio has decreased 3.10% over the last ten trading days (from 1.29 to 1.25).
3. Casey's General Stores Inc. (CASY): Market cap of $1.59B with a dividend yield at 1.43%. Put/call ratio has decreased 2.37% over the last ten trading days (from 1.69 to 1.65).