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

To: Grantcw who wrote (40730)	12/20/2010 6:04:39 PM
From: E_K_S	Read Replies (1) \| Respond to of 78482

Hi Grantcw The key IMO on SVU is if sales have indeed bottomed. The company is paying down it's debt faster than any of the other companies you listed. They are able to accomplish this from their cash flow. As a result, stock holder's equity is growing much faster. It also looks like SVU is able to maintain their current sales margins (operating margins are now around 3%). SWY had to cut their margins earlier this year (ie lower prices) just to maintain their previous sales level. Hopefully, SVU did not have to do this. SVU does have some play in their margins w/o killing their free flow cash. It's a balancing act and it really all hinges on where we are in the cycle and if the sales slump has bottomed. My one best play for 2011 is SVU. I would like to load up on more shares but would like to see some discussion from management about company Q4 sales (did we see their sales bottom in Q3) and if there are plans to refinance some of their debt especially the $1B coming due in 2016. It may be too late to get cheap shares once any positive news hits the streets. If it is bad news then you may not want any more shares. SuperValu: Earnings Play With Compelling Risk/Reward Ratio seekingalpha.com From the article:"...SVU is past due for an upside surprise, and this time around it might just pull one off. My “shot in the dark” on this one is earnings of 33 cents on sales of $8.76 billion. If this occurs, the shares could rise an immediate 10-20%. Also, the fact that its short interest has approached historic highs (16% of its outstanding shares) means “fuel to the fire” could be added as fast and furious short covering becomes plausible.,,," You might want to add Whole Foods Market, Inc. (WFMI) to your company comparative list. Their EV/Sales is 4x that of SVU and are able to maintain 5% operating margins. SVU would be selling at $18.00/share - $20.00/share if it was priced like WFMI. What's your strategy if they surprise to the upside? EKS