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Strategies & Market Trends : Value Investing -- Ignore unavailable to you. Want to Upgrade?

To: Tapcon who wrote (32810)	11/19/2008 11:56:31 PM
From: E_K_S	Read Replies (3) \| Respond to of 78753

Hi Paul - SVU has the most debt per share of the three major grocery chains (KR, SWY & SVU). This was due to their acquisition of Albertsons almost two years ago. The large debt (including goodwill) results in a negative Tangible Book Value for the company. SVU pays this debt with the cash flow they generate from operations which has been more than sufficient to cover this expense. Remember that depreciation expense is an accounting book entry and the extra cash can be used to pay down debt. Of the three companies their percentage of cash flow used to service their debt is the largest and therefore in any significant economic downturn (ie lower revenues) may cause them to violate their bank loan covenants. SI has a detailed financial profile screen that shows a host of detailed company statistics and ratios. Take a look at the "Financial Structure Ratio" and "Per Share Figures" section for each company and you will notice SUV has a negative free cash flow per share and the other two companies are positive. SVU si.advfn.com^SVU SWY si.advfn.com^SWY KR si.advfn.com^KR By market cap SVU is the smallest of the three but one of the most efficient operators and are know in the industry to have very good warehouse and distribution logistics. SWY is 4x larger and KR is 8x larger but SVU is the most profitable on a per share measure. In fact, they earn almost as much per share as SWY with 1/4 the amount of sales! SVU should be able to manage their current debt situation and in fact could sell additional stores if they were forced to do so. The ones they cherry picked from the Albertsons purchase are quite profitable and both KR and SWY would be willing buyers since the individual stores are so profitable. I suspect SVU could reduce their dividend if they felt they needed to preserve cash. According to this article, grocery store revenues are in fact increasing as customers are shopping more and eating out less due to the recession. Grocers are retail's bright spot Wednesday, November 19, 2008 sfgate.com From the article:'...Grocery stores have emerged as a bright spot, posting steady or increased sales at a time when almost all other areas - including auto dealers, furniture retailers and department stores - reported significant declines. In last week's Commerce Department's monthly retail report, food and beverage stores saw a 4.8 percent increase in October sales compared with the same month last year..." ================================================================ My position is small in SVU but if it fall much more I may have to buy more shares as I believe they will be a survivor. I did buy some more DD today as it continued to sell off especially at the end of the day. This is my solar play which is supposed to be a conservative way to invest into the solar industry. With the way the market is falling, it feels like their is no one conservative approach other than to sit on cash. I now think that many of the super low PE's is Mr. Markets way of telling everyone the the "E" is going to fall significantly in the future. EKS