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

To: Spekulatius who wrote (47306)	4/4/2012 9:44:25 AM
From: E_K_S	3 Recommendations Read Replies (2) \| Respond to of 78702

Hi Clownbuck - Re: SVU The author provides a compelling argument that SVU could be a value trap. He did not discuss the value in their company owned real estate (similar to Tesco, Walmart, Sears and Target). I have not looked recently to see if this makes up a large component of their assets but this was always a large factor in my review. Second, the author does not discuss the Pharmacy franchise they obtained from the Albertson's purchase. They are one of the top 5 (if not top 3) medical prescription providers in the U.S.. The margins in this business can not be compared to the margins in their grocery business. Lastly, there was no discussion about the company's ability to generate FCF especially while operating a profitable distribution/logistics division. I think I agree w/ his conclusion that a significant restructuring is required that scales down the food side of the company and highlights their pharmacy side. Their distribution/logistics division could be spun off and/or expanded to serve Target's expansion plans and/or even be acquired and folded into Sysco's operation. Therefore, I think the author is a bit too narrow sighted on where the potential value opportunities are. In the current structure, his conclusion is probably accurate especially since this industry (food sales) is a very thin margin business. They just can not make it up on volume w/ their huge debt load (at least in the 3-5 year time horizon he is looking at). EKS