Hello EKS,
Good points about SVU.
Yes, WFMI is definitely a pricey one on those metrics. But, a better comparison from a business standpoint than companies like Walmart and Target, which I threw in there. Good food for thought. Personally, as a value investor, I'd rather be in SVU with it's large # of save-a-lot's than the higher-end Whole Foods, but I think maybe that's because I'm more on the frugal end in real life. :) I imagine there are non-frugal value investors out there.
I guess my strategy is that I'm hoping that the valuation metrics listed don't get worse for SVU. If EV/EBITDA is 4.24, I hope the market at the very least continues to give it this valuation, if not better.
Then, as SVU pays off debt with cash flow, the common will hopefully increase directly with the payoff. And I like the fact that the common market cap is under $2 billion now, but they're paying off over $0.5 billion this year. That's a decent gain right there if that payoff goes right to the common. Add to that the fact that SVU may get a valuation metric bump as the debt is paid off, and we're looking at a good risk/reward.
To your question, I have a big enough position in SVU that if for whatever reason it bumped 20%+ over 10, I'd probably sell some shares into a run. I don't expect it too though.
Thanks,
Grant |
