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Strategies & Market Trends : Value Investing
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To: Ccube who wrote (76269)11/25/2024 9:28:04 PM
From: E_K_S  Read Replies (1) of 78476
 
Re: United Nat Foods (UNFI) 24.95 +1.34 (+5.68%)

I took a few off the table today but still hold a good size of the shares I bought in July/August 2024 at/near $12/share. Have some I bought at $9.05/share in 4/2024 too (+177% yikes). However, 70% of my long term shares are from 2020 at an avg cost of $6.56/share.

The market is pricing the stock for a big positive turn in FCF. Last 4 quarters have had negative FCF but every quarter has been getting closer to turning positive. In 2022 the stock ran to $50/share w/ growing FCF and EPS peaked to $1.10/share per quarter then slowly fell in 2023 to $0.31/share and then down to a loss towards the end of 2023. Was this drop due to Covid?

The EPS can change significantly for various reasons; lower margins, higher expenses, logistic one time fees and/or one time write downs. Over this period UNFI has expanded their distribution footprint.

The company has installed the robot warehouse inventory/logistic system sold by Symbotic Inc (SYM)

UNFI & Symbotic Announce Agreement to Implement Automation (September 2022)
  • UNFI and Symbotic announced a commercial agreement to implement Symbotic's automation systems in five of UNFI's distribution centers. 4
  • Symbotic Inc. is an automation technology reimagining the supply chain with its end-to-end, A.I.-powered robotic and software platform. Symbotic Inc. is based in WILMINGTON, Mass.
This is the same system WMT uses (they are SYM's largest customer). WMT is at an all time high and SYM's logistic systems have helped WMT control their costs.

I suspect, UNFI is seeing the benefit (and reduced costs) from building out their SYM logistic systems (it's been a multi year process for them).

The SMA(200) weekly price is $30/share. This is the target I am looking for. If those efficiency gains get traction and earnings are coming in at $1/share for consecutive quarters, one could make the argument that UNFI could sell at $50/share or higher.

UNFI made a 17 month high today +5.68%. Earnings are December 10, 2024.
According to Zacks Investment Research, based on 4 analysts' forecasts, the consensus EPS forecast for the quarter is $0.01. The reported EPS for the same quarter last year was $-0.04.
That's a low bar for them. If EPS are positive (along w/ positive FCF) and forward guidance higher we could see a sustainable run through $30/share and eventually to $40-$42 area.

I do think 2025 will be a telling year for the company. Will be scaling out of my oversized position as we move thru the SMA(200) weekly at $30/share and see if we can trade into this $40 - $42 share area by June/July 2025.
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