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Strategies & Market Trends : Value Investing

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From: E_K_S	3/15/2005 11:27:55 AM
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Albertson's out with their 4th QTR earnings today 03-15-05 (ABS) and missed their target earnings levels. The company stated new forecast that fiscal 2005 earnings from continuing operations will now be between $1.33 and $1.43 per diluted share. At 15 PE the stock should sell for $21/share. The company did reduce their costs by $1 Billion and forecast another $250 million reduction in FY 2005. I picked up a few more shares of their Preferred Series A (http://finance.yahoo.com/q?s=abs_p) stock that pays almost an 8% dividend through May 2007. I suspect it will be at least another 12-24 months for management to implement all of their technology productivity systems, obtain complete coverage of their new labor agreements and further develop their drug and specialty stores so they add significant marginal revenues and profits to the company. ABS does sit on a significant amount of valuable real estate that is not reflected in their stated book value. So IMO the downside risk is low as long as management can increase same store sales by continuing to weed out unprofitable stores and disposing of that real estate. I will be buying more shares if the stock trades in the high teens on any more bad news because of the underlying real estate market value (look at K-Mart & Sears). The frustrating fact is this turn around story has been in play for almost five years and profitable changes have been few. On the positive side, they did accomplish significant savings in their new labor contracts which will benefit the company for several years to come. I have been wrong in the past and an early investor on this "turn around" so buyer beware. EKS

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