Food for Thought
Two Solid Companies with Good Value
Thanksgiving is a great time of the year, especially because
it brings back many fond memories of yesteryear. This year, my
wife and I will be traveling to Port Orange, Florida, to camp out
for a few days in our trusty two-person tent. I've never been to
Port Orange, so I look forward to seeing another new place.
In years gone by, I can recall going to my grandparents' house
in Lynnfield, Massachusetts. Joining Grandpa and Grandma for
Thanksgiving dinner was always special. Great food (I still love
turkey), fun and games, and a long walk made for an idyllic day.
I have spent Thanksgiving in many different places with various
friends and family, but few compare with those old Thanksgivings
I hope that you will have a great feast and a memorable day
with friends and family!
Switching gears, let's talk about making money.
Sometimes I get frustrated when investors don't understand my
intended role in the investment world. After many years, ok,
decades, I have found that the best way to make money in the
stock market for me is to invest in conservative stocks for
long-term holding. No market timing, no charts-just buy blue-chip
companies at low prices and wait patiently until the stock price
becomes overvalued. I simply want to take advantage of the
natural ebb and flow of the stock market.
If you are thinking my profits are minuscule because of my
conservative style, then I offer this evidence. For the 12 months
through the end of September, my Modern Value Model stocks are up
44% compared to a gain of 24% for the Dow Jones Industrial
Average! That's significantly better than most mutual funds, most
investment letters and even hedge funds. During the past decade,
the Model has increased 130% compared to the 78% increase by the
Dow. When you invest in stocks with very little downside risk,
good things happen!
In the November issue of my Cabot Benjamin Graham Value
Letter, I suggested buying 18 stocks. Included in the list were
), Cognizant Technology (
) and Mindray Medical (
). Rather than buy these three stocks at the current price, I
strongly urged my faithful subscribers to buy only if the stock
prices declined to their Maximum Buy Prices (targets) of 71.54,
64.33 and 32.96 respectively.
CELG, CTSH and MR briefly declined to my computer-generated
buy price targets, and have since produced profits of 7%, 1% and
1% in just three weeks, while the Standard & Poor's 500 Index
has dropped 2%. The three stocks, as expected, are on their way
to producing more profits for my happy subscribers.
These examples are very good illustrations of what the Cabot
Benjamin Graham Value Letter is all about: buy at the suggested
Buy Price, Hold, and Sell at the suggested Sell Price. No, the
system doesn't work perfectly every time, but the results over
the past several months and years indicate that this is the most
profitable system with the least amount of risk anywhere!
I also publish Minimum Sell Prices for CELG, CTSH and MR, plus
247 other stocks. One of our recommendations is very close to its
Minimum Sell Price after gaining 101% during the past 29 months.
To find out how you can increase your profits and dividends using
a safe, sensible system,
In keeping with the season, I offer two companies that likely
sold thousands of turkeys before Thanksgiving Day. Both companies
sell at a very reasonable price and pay solid dividends.
(IMKTA: current price 15.92) is a leading supermarket chain with
operations in six southeastern states. Founded 47 years ago in
Asheville, North Carolina, the company operates 203 supermarkets
located typically in smaller towns and cities. In addition, the
family-run business owns and operates 71 neighborhood shopping
centers, 59 of which contain an Ingles supermarket. Ingles also
operates 74 in-store pharmacies and 70 on-site gas stations.
Ingles opened a newly built distribution and warehouse center
in Asheville to replace its outdated (and only) facility. The new
center will increase efficiency and add to profitability.
The company is expanding its selection of private label items
under the Laura Lynn name. Private label goods are clearly more
profitable. The company is enjoying a surge in demand from
consumers who are opting to buy groceries and cook at home rather
than spend extra money to dine at restaurants.
The transition to the new distribution facility and higher
food costs will hold back earnings growth during the next quarter
or two, but I expect 5% sales and 15% EPS (earnings per share)
growth during the next 12 months. Cash flow of more than $5.00
per share is more than enough to expand Ingles' store count, and
at the same time, pay down its high debt load and reduce interest
At 8.2 times my EPS estimate of 1.95 for the next 12 months
ending 9/30/13, IMKTA shares are a bargain. Ingles has been
paying quarterly dividends since 1987, and the current yield of
4.1% adds substantial value and stability. I recommend buying
IMKTA below 16.85.
. (KR: Current Price 24.53), founded in 1883 in Cincinnati, is
one of the largest U.S. grocers with 2,476 supermarkets in 31
states. The company also operates 779 convenience stores, 393
jewelry stores, and 737 supermarket fuel centers. It also
operates 41 food processing plants providing 15% of total grocery
Kroger's typical format includes food and drug stores
containing bakeries, delis, seafood, meat and floral shops, pet
centers and high quality fresh items such as organic produce.
Supermarket fuel centers are also located at many locations. The
company's "Customer First" strategy emphasizes consumer
Management recently introduced a new program to boost the
number of new stores significantly. Kroger's will also expand its
business to include discount stores and restaurants. Management
is committed to improve sales and earnings growth considerably
during the next couple of years.
During the past 12 months ended 8/31/12, sales increased 6%,
and EPS rose 14%. In the most recent quarter same-store sales
climbed 3.6%, which is noticeably better than previous quarters.
Kroger is taking market share despite formidable competitors such
At 9.8 times my one-year forward EPS estimate of 2.50, KR
shares are undervalued. Stronger same-store sales and multiple
new store openings will lead to sales and earnings gains of 7%
and 12% during the next 12 months ending 8/31/13. Kroger shares
are less volatile than the shares of most companies. The dividend
yield of 2.4% is generous. The company has been paying a dividend
since 2006 and has increased it every year since. I recommend
buying KR below 26.02.
I will continue to follow Ingles and Kroger, as well as many
other blue-chip, high-quality companies in my Cabot Benjamin
Graham Value Letter. My next issue, coming soon, will focus on
undervalued stocks with low P/E to growth (
) ratios. I hope you won't miss it!
Cabot Benjamin Graham Value Letter
Ten Best Dividend-Paying Companies
Now's the Time to Buy Undervalued Canadian