Category Archives: $SBRY

$TSCO(tesco) stock did not react to criminal investigation – – is now a time to buy?

When news of a criminal investigation hit tesco with stock around 175, the stock dropped a little but has recovered to 194 perhaps signalling that 170 was the bottom as outlined in last tweet.

According to Hargreaves Landsdown, Tesco was one of the top purchases by retail investors in the last month.

2CentView FV on $TSCO = 180, Yield just 3%, payout ratio = 40%, with an earnings recovery in 2018/19.
So do not see significant upside from the current 194 price.

Look to buy on weakness around 170 area if it gets back there, as there other opportunities which are better than Tesco right now – but you may need to wait for any significant capital gain.

$SBRY FV=225 Yield 6%, Payout = 50%
$MRW FV=190 Yield 6%, Payout = 70%

$TSCO (Tesco) the fair value and the floor – is the trade on here?

Tesco have been hit hard by the recent profit warning and dividend cut – the share price decline from 340 at the beginning of the year has been savage – it operates the best margins among the large supermarket – 5% – but this according to the FT could be cut in half – $SBRY already operate on a 2.5% margin, so the decline has been less severe.

FV=255 – but this does not reflect a potential margin cut to 2.5% as analysts have not downgraded their forecasts yet.
A margin cut to 2.5% would see EPS in the 16p per share region vs 24p current forecast giving
a FV = 225
A further cut in dividend from 50% to 40% would knock off another 20% of this so – 180!

So FV=225 with Floor of 180.

If you decide to buy $TSCO, 2CentView is that you should look to buy between the 225 FV and the floor e.g. around 200 and believe new CEO Dave Lewis can focus on high margin products and services to offset lower margin products like Milk and Cereal. Clarke did’nt nothing for $TSCO!

A bag of Granola costs £2 in ALDI and £4 in Tesco – they are different brands so the price promise doesn’t work, and the £2 ‘Harvest Morn’ ALDI Granola is not that bad!

$SBRY (Sainsbury) Update post results – FV Update.

Sainsbury seems to be holding up against competition from the low end of the market – posting results showing they are not losing market share like Morrisson and Tesco.
FV lower at 345 from 360 as Analysts price lower EPS Forecasts.
$SBRY has quite a lot of short interest, so may go higher as shorts get covered.

At a 5% yield, take some profit above 340 if you got in at the low 300-310 area, but keep some for the yield and potential further upside.

Comparables:
Morrission , FV=180
$TSCO FV = 265

UK Budget – Pension Shakeup “We plan to overhaul the system completely”…..

The government made a huge change to pensions – from 2015 you can do what you want with your private pensions at 55 subject to marginal tax rate. This mean that you are NOT forced to buy a stupid Annuity or have income drawdown restrictions on your personal pension!
Download the udget_2014_greater_choice_in_pensions_explained.pdf from the government web site.

For example if you had 400k in your private pension then take 100k as cash tax free, the rest you can take out subject to normal tax rate in that year – so if you have retired at 55, and take out only 10,500 you pay no TAX!.

Hargreaves Landsdown stock – the provider of SIPPS rallied 15% on the news and the annuity providers were sold off – it is anticipated many more will contribute to SIPPS.
So plan to have 400k at least in your private pension by 55 – then sell the Porsche for a LAMBO! or pay any debts on your buy to let portfolio or buy the villa in south of france…..its entirely up to you..

Construct your portfolio now of the following:

Recovery plays – Good Companies which are broken but are coming back.
Stocks below have made dramatic gains in less than 3 years:
Sports Direct 60 o 800
Thomas Cook 20 to 180
SuperGroup 300 to 1700
DIxons 20p to 50p
HPQ 12 to 30
RiteAid: 1.50 to 6.50

2CentView model identifies when broken companies earnings expectations are expected to rise but the stock price has not reflected this change.

Low Beta Income stocks

BP, DLG, Scottish and Southern – now SBRY.
Buy these companies when there is potential upside of 15%-25% and dividend carry of between 4 and 6%. e.g. $SBRY FV=360, carry = 6%!

Growth Stocks
the Hardest to play – you need to know what you are paying for the growth and whether you think it can meet these expectations (use the PEG as a guide). If you are right gains will be big, but so also is the risk – the stock will be savaged and you will lose a lot if the company fails to meet the expectations.
Important to stick to stops on these.
2CentView model shows that growth stocks fall into 4 categories (over 5 years): low (5-15), moderate (15-35), High (35-50), Super(50-80)

Low: Apple, MSFT, HPQ, IBM, Oracle
Moderate: Google, GOGO, FSLR
High: FaceBook, AMZN, NetFlix, Tesla, GIMO
Super: FUEL, Twitter

Market will rise and vol week to week, how do you trade this?

2Centview strategy is to buy stocks with potential upside of between 15% (low risk names) and 100% (high risk names) so that stops can be set outside of the normal market volatility of up to 10% (VIX Norm)

So if you are down 5% or so then is ok – but if the market continues to fall then make sure you take your losses when stops are hit – and look for opportunities when the market cheapens up. However, if the overall trend is down, then you may be end up converting your stock positions into cash as more stops are hit – which is ok also – there is the possibility of the armaggedon situation – war between the USA and Russia!

However, keep your core positions (positions you have built up with zero or little cost) for longer term – unless they go into secular decline. I made the mistake of selling some of my core $SGP position at 14 – it is now 16.68!

So buy $SBRY stock now if you have not – FV=360, Yield = 5% – good defensive play with carry and upside. But Set a stop of of 275. UK Supermarkets may go into another price war.

More ideas to follow if market continues to cheapen up. If you have to be in to WIN IT but if you are doom and gloom merchant then keep away!

UK Supermarkets – all traded down from recent highs set early in the year…which is best pick…

Looking for low beta stocks (less than .75), with dividend yield and upside ? You should have some of these kinds of stocks in your portfolio – if you missed $SSE (now 1425 from 1300 and $DLG), look at the UK supermarkets – they have all traded down since recent highs set early in the year

$SBRY FV=360 Yield = 4.8% px = 339 5Y Implied Growth = 4%
$TSCO FV=324 Yield = 4.6% px=322 5Y implied Growth = 6%
$MRW FV=239 Yield=5% px=232 5Y implied growth = 2%

The other thing supermarkets is the hidden value of the property assets – which is normally in the balance sheet at a conservative valuation – and one of the reasons leveraged buyout funds find them attractive.

2CentView pick is $SBRY – could trade back to highs of 390 – and has 1billion hidden value from the property assets.
Trade: Buy here at 339, TP=385 for 15% upside potential 4.8% carry.