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Kroger: Contrarian Play With Upside In Digital

Aug. 04, 2021 8:49 AM ETThe Kroger Co. (KR) Stock10 Comments


Kroger Supermarket. The Kroger Company is one of the largest grocery retailers.
jetcityimage/iStock Editorial via Getty Images

Despite some bumps along the way from concerns over the delta variant to COVID, 2021 is set to be a rewarding year for investors. As a provider of an essential service, supermarkets have been able to manage the

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I previously worked in the financial sector across multiple industries, including consumer, renewable energy, technology, healthcare, and industrials. I am a traditional "buy-and-hold" investor that prefers smaller cap, value stocks based on the academic research supporting long-term returns.

Analyst’s Disclosure: I/we have no stock, option or similar derivative position in any of the companies mentioned, and no plans to initiate any such positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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Comments (10)

AzeriaInvest profile picture
I did my DCF and come up to around $47 too. I am also long Spartan Nash, nice defensive stocks with what looks good management.

My big question mark is Ocado here. Delivery and online can lead to powerful cost savings and synergies. However, I would assume competition from Amazon and other companies would soon erode those margins. Therefore, there is probably as strong benefit to being a large player already to keep your seat. And this "top 3" + Ocado partnership play could be a winner. I just do not see the magnitude as I lack expertise. An operating margin of 4% could leave a huge upside for example (almost 2x), although thats a big margin increase. But it shows the magnitude.

It might be a good stock to accumulate over time and capitalize on compounding shareholder returns.
Baloney Sandwitch profile picture
Great company. Very unappreciated compounder.

I’m beginning to worry about the blue states allowing the un employment payments to continue. The KR stores here in Michigan are understaffed and can’t keep the shelves full, which mean their missing sales. There is help wanted signs all over this state. I feel the governor is very culpable in causing the inflationary situation.
I no longer own Kroger...
KR presently has a lot of hurdles to overcome...

Moscow Mitch's husband, billioniare Elaine Chow
just bought her way onto the Board of Kroger.

We expect Kroger to soon be expeditiously looted and fleeced.
When you closely follow some people's career history, some people just leave a trail of destruction. yes, Im sure some might consider this somewhat political, but the overwhelming evidence sometimes just speaks for itself.

Baloney Sandwitch profile picture
@1504661 Yep its political. What do you make of Buffett buying KR. I think he is democrat - not that it matters. www.gurufocus.com/...
@Baloney Sandwitch

I have owned KR on and off in the past. I have nothing against KR, but KR is not something I want to invest in until there is better clarity on both the economy, inflation and rates. I don’t believe rates will change significantly anytime soon, and I also don’t think inflation is a problem either. Higher prices(inflation expectations) are mostly all from covid supply and demand issues, not true inflation. For there to be sustained lasting inflation, we need 3 requirements that are presently no where to be found. Also, for inflation to even be possible, it needs to be supported by wages. We’re about to see higher prices be rejected. Inflation” has sadly just become something else that’s been politicized. People who have very little idea of what inflation truly is are screaming its a problem. Well a closer look reveals it really clearly isn’t.

I sometimes shop at KR. I have noticed there is a huge “We’re hiring” sign at the location where I shop, and the sign promises $10/hour. As an investor, I love that, however as a shopper it’s dreadful and annoying because $10/hour people are seldom competent, helpful or customer-oriented. It’s like the blind leading the blind, but it is what it is, and it doesn’t bother me. Im not currently long KR, but I would go long temp at a better/lower valuation.

Im long BRKB. As for what Buffett could be up to, Im not sure.
He could be buying KR just to reduce all that cash he has, or to add stability to BRK. Im waiting patiently to see what Buffett does with all that cash. I don’t really see what could possibly transform KR much differently right now… That said, though, for Elaine Chow to jump on board at KR, something must be in the works. I can’t believe she is there as a benevolent seat taker. As they say, make no small plans.
Baloney Sandwitch profile picture
@1504661 I too hate the systematic exploitation of the poor in this country but its really about the priority of its politicians to fix. Look north to Ontario - $16 minimum wage, universal health ...
However can't argue with the numbers KR is posting. They operate within the system.
Baldy2000 profile picture
KR Pickup service during Covid is a winner where I live. Super efficient.
J. Mark D profile picture
The last three weeks I have had 1200 shares of KR called away (I sold covered calls) in the $40-41 range. They were long term, and I've been selling covered calls for years, so maybe it was time. But KR's recent surge definitely surprised me. Still own quite a bit, long KR. Thanks for this analysis, as always.
MoneyFarmer profile picture
Nice analysis. Thanks
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