Buy Safeway, Even Though It Keeps Closing Stores [View article]
They have closed some stores and I agree with you that's positive but it is a small number to dramatically change SWY's profitability. On margins, if you have looked at the 5-year trend you see it is declining (EBIT margin was above 4% in 2007 to 2-2.5% now) and it isn't showing signs of a quick turnaround. They may improve the business profitability going forward but they have taken some steps in the recent past towards it without much results...
Buy Safeway, Even Though It Keeps Closing Stores [View article]
SWY operating margin has declined over the last quarters and I'm not seeing a recovery soon. Why do you think SWY will improve its business considerably in the short-term? Although it may be cheap, it may also be a value trap because of fierce competition that will continue to pressure SWY margins.
Fiat SpA: A Bargain For The Savvy Investor [View article]
You don't take into analysis the aging model range. Even if European sales recover next year, Fiat will much probably continue to lose market share. For example, Renault recently launched the new Clio and Peugeot its 208 model, which compete directly with Fiat Punto and is now more than 7 years old without any major overhaul.
Carrefour: Good Results But Disappointing Strategy [View article]
crozz, thanks for the feedback. Although I didn't liked Carrefour's "strategy" presentation they have been able to sell some assets at good valuations (especially Colombia). This can support in the short-term Carrefour's share price but over the long haul I'm still bearish on Carrefour.
Safeway's Low P/E Ratio Could Be Misleading [View article]
Grox01, thanks for your comment.
I agree share buybacks is a management's decision on the way to use the company's cash. However, in my opinion, not the best one. If they want to remunerate shareholders, I think it's best to pay dividends and let shareholders decide the way that want to use their own cash. If there are growth opportunities use the cash to funding.
As Safeway operate in a saturated market clearly the best use for its cash would be to cut debt. This way you would have a real cut on expenses. With share buybacks I don't see how the company cuts expenses.
On your last point, I agree 100% and would be the best sign to unlock Safeway's upside potential.
High-Risk, High-Reward Revisited: 2 Companies With Yields Over 9% [View article]
Yes I agree with that viewpoint, that's why I recommend Portuguese companies that have foreign operations which can balance the weak operating environment at home. I would completely avoid companies that are mainly exposed to domestic households,construction companies or banks. Think of Sonae SGPS, Mota-Engil, Zon, etc...
High-Risk, High-Reward Revisited: 2 Companies With Yields Over 9% [View article]
Thanks for your feedback danceuport2. I've a few articles published over the last months about Portugal and Portuguese companies here on SA. I especially recommend "Does Austerity Work?" http://seekingalpha.co...
Although I didn't bought EDP or PT due to funding constraints, I believe that for the long-term they offer value for contrarian investors that don't worry about short-term volatility.
High-Risk, High-Reward Revisited: 2 Companies With Yields Over 9% [View article]
danceuport2, Thanks for your comment but I'm Portuguese so I know what I'm writing. All that you said it's true but company valuation is forward looking by nature. This means a lot of bad news are already reflected on share prices. I'm aware that Portugal isn't the safest place to invest, that's why the article title is "High-Risk, High-Reward". Nevertheless, if you look for safety clearly choose another country to invest.
High-Risk, High-Reward Revisited: 2 Companies With Yields Over 9% [View article]
gdli44, Telefonica has already sold most of its stake on PT. In 2006-07 TEF had around 10% of PT's equity but now it only remains with 2%. Given that PT currently has a low share price I don't think TEF will sell the remaining shares soon, so I don't expect it to be a significant headwind.
European Stocks With Yields Of Up To 16% [View article]
There are some companies mentioned that guided for lower dividends going forward, such as Portugal Telecom, France Telecom or KPN. If you consider the forward yield, it is much lower than what you referred.
Analysis Of Safeway's Dividend Sustainability [View article]
Thanks for your insights, it helps to understand better SWY business. It also reinforces my view, the company is well-run and competitive but the issue are the industry headwinds. However, all players are hurt by those issues thus I think the better way to play it is probably by long/short trades.
Analysis Of Safeway's Dividend Sustainability [View article]
EnforceTheLaw, thanks for the feedback and your insights on SWY.
Regarding your questions, I think that we first must separate the company’s specific issues from industry-related factors. Basically, in my opinion, grocery stores compete firstly on price and secondly on location. There are other factors that can attract clients but are usually secondary to the previous ones. Thus, when sales fall retailers will lower prices until they see some improvement, naturally leading to lower margins. This is what happening now, with SVU and others competing on price. See for instance my previous article on Delhaize, they have lowered prices and saw almost immediately some like-for-like sales improvement, but at the expense of lower profit margins.
So, regarding your question, I think Safeway has a valid strategy to mitigate these industry headwinds. Will they be a competitive advantage going forward? I have some doubts. Safeway has renewed its stores since 2004, and has you can see from my analysis, this wasn't enough to sustain the company’s operational performance.
Regarding real estate, I didn't mention it because it didn't seem to be especially important for dividend analysis. If you look at the balance sheet and the number of stores over the past 5-6 years, you can see that both remained relatively stable. Despite the improvements made in stores over the years, at first look, this can be a signal of some overvaluation. However, I’m not an expert on real estate market so I can’t give you a precise answer. I usually appreciate shopping centers near traditional grocery stores, as they can attract more customers and provide some income diversification. Is this something that other competitors (SVU, KR, etc) don’t have? If so, it can be a competitive advantage, at least to maintain a stable market share.
Buy Safeway, Even Though It Keeps Closing Stores [View article]
Buy Safeway, Even Though It Keeps Closing Stores [View article]
Fiat SpA: A Bargain For The Savvy Investor [View article]
Carrefour: Good Results But Disappointing Strategy [View article]
Safeway's Low P/E Ratio Could Be Misleading [View article]
Safeway's Low P/E Ratio Could Be Misleading [View article]
I agree share buybacks is a management's decision on the way to use the company's cash. However, in my opinion, not the best one. If they want to remunerate shareholders, I think it's best to pay dividends and let shareholders decide the way that want to use their own cash. If there are growth opportunities use the cash to funding.
As Safeway operate in a saturated market clearly the best use for its cash would be to cut debt. This way you would have a real cut on expenses. With share buybacks I don't see how the company cuts expenses.
On your last point, I agree 100% and would be the best sign to unlock Safeway's upside potential.
High-Risk, High-Reward Revisited: 2 Companies With Yields Over 9% [View article]
High-Risk, High-Reward Revisited: 2 Companies With Yields Over 9% [View article]
I've a few articles published over the last months about Portugal and Portuguese companies here on SA. I especially recommend "Does Austerity Work?"
http://seekingalpha.co...
Although I didn't bought EDP or PT due to funding constraints, I believe that for the long-term they offer value for contrarian investors that don't worry about short-term volatility.
High-Risk, High-Reward Revisited: 2 Companies With Yields Over 9% [View article]
Thanks for your comment but I'm Portuguese so I know what I'm writing. All that you said it's true but company valuation is forward looking by nature. This means a lot of bad news are already reflected on share prices. I'm aware that Portugal isn't the safest place to invest, that's why the article title is "High-Risk, High-Reward". Nevertheless, if you look for safety clearly choose another country to invest.
High-Risk, High-Reward Revisited: 2 Companies With Yields Over 9% [View article]
High-Risk, High-Reward Revisited: 2 Companies With Yields Over 9% [View article]
High-Risk, High-Reward Revisited: 2 Companies With Yields Over 9% [View article]
European Stocks With Yields Of Up To 16% [View article]
Analysis Of Safeway's Dividend Sustainability [View article]
Analysis Of Safeway's Dividend Sustainability [View article]
Regarding your questions, I think that we first must separate the company’s specific issues from industry-related factors. Basically, in my opinion, grocery stores compete firstly on price and secondly on location. There are other factors that can attract clients but are usually secondary to the previous ones. Thus, when sales fall retailers will lower prices until they see some improvement, naturally leading to lower margins. This is what happening now, with SVU and others competing on price. See for instance my previous article on Delhaize, they have lowered prices and saw almost immediately some like-for-like sales improvement, but at the expense of lower profit margins.
http://seekingalpha.co...
So, regarding your question, I think Safeway has a valid strategy to mitigate these industry headwinds. Will they be a competitive advantage going forward? I have some doubts. Safeway has renewed its stores since 2004, and has you can see from my analysis, this wasn't enough to sustain the company’s operational performance.
Regarding real estate, I didn't mention it because it didn't seem to be especially important for dividend analysis. If you look at the balance sheet and the number of stores over the past 5-6 years, you can see that both remained relatively stable. Despite the improvements made in stores over the years, at first look, this can be a signal of some overvaluation. However, I’m not an expert on real estate market so I can’t give you a precise answer.
I usually appreciate shopping centers near traditional grocery stores, as they can attract more customers and provide some income diversification. Is this something that other competitors (SVU, KR, etc) don’t have? If so, it can be a competitive advantage, at least to maintain a stable market share.
Sorry for the length…