Is Woolworths a good buy?
If your strategy is to buy extraordinary businesses trading at discounts to intrinsic value, Woolworths offers the required combination. Roger Montgomery explains why Woolworths is a good buy. Read Roger’s article.
Roger Montgomery is the Founder and Chairman of Montgomery Investment Management. Roger has over three decades of experience in funds management and related activities, including equities analysis, equity and derivatives strategy, trading and stockbroking. Prior to establishing Montgomery, Roger held positions at Ord Minnett Jardine Fleming, BT (Australia) Limited and Merrill Lynch.
This post was contributed by a representative of Montgomery Investment Management Pty Limited (AFSL No. 354564). The principal purpose of this post is to provide factual information and not provide financial product advice. Additionally, the information provided is not intended to provide any recommendation or opinion about any financial product. Any commentary and statements of opinion however may contain general advice only that is prepared without taking into account your personal objectives, financial circumstances or needs. Because of this, before acting on any of the information provided, you should always consider its appropriateness in light of your personal objectives, financial circumstances and needs and should consider seeking independent advice from a financial advisor if necessary before making any decisions. This post specifically excludes personal advice.
Anton Rijntjes
:
Hi Roger.
I am a univeristy Student in South Africa. I am currently doing my honors in investment management. We have been given a task to value woolworths but I am not sure where to start. Would you be able to give me some advice? I look forward to your reply
Roger Montgomery
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Order a copy of Value.able Anton!
Gil
:
Hi Roger,
I am currently a university student studying commerce and arts. I have been working part time and I have about 4k to invest. I have followed you on skybusiness and am in the process of reading your book. I have already purchased 2k of ANZ shares at $19.41, i was thinking due to the instability at the moment of investing the remaining 4k in ANZ at lower price than my previous purchase. I was wondering if you think I should diversify (my small portfolio) or should stick with a the bluechip and enjoy the good
dividends.
Regards Gil
Roger Montgomery
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Hi Gill cannot give you any advice here or anywhere else. You should seek and take personal professional advice.
Hiten
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Read an article today.
“Woolies on a winner with Maccas at Masters”
“Woolworths has hit a winner with its move to use the Golden Arches to lure customers to its Masters hardware stores, according to insider reports after the first few weeks of trading.”
…..
Full article
http://au.news.yahoo.com/thewest/business/a/-/national/10274930/woolies-on-a-winner-with-maccas-at-masters/
I think it’s a good move from Woolies. What do you reckon Roger?
Roger Montgomery
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They have a phrase for this that describes a mold-breaking initiative like this
Tim
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Hi Roger,
Enjoy reading all your articles and posts on your blog.
I was wondering how you calculated your discount to IV or MOS.
At the end of this article you state that Woolworths estimated IV for 2012 is $28.40 and current price is $26.47, representing a discount to IV of 4%.
Just want to be clear in my head how you calculate!
Kind regards,
Tim.
Andrew
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Hi Tim,
It takes a while for an article to be written and then published and released as part of a monthly magazine. The easy answer would be that at the time Roger wrote that article the mos was what he said it was. This is why it is important to ensure we do our own research as by the time we may have written something by Roger many things could have chjanged including the valuation, MOS or he could have even have sold the shares he was talking about.
As for how to work out the MOS, i just go (market price-IV)/IV
Tim
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Thankyou I understand. Just using quoted figures could not come up with the 4%.
Thanks for taking the time to reply, much appreciated!
Andrew
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Sorry, i meant read something from Roger.
Andrew
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Woolworths is always a company on my watch list and i have a similar 2012 IV to you. Just a visit to my local shopping centres will show you that even though Coles is gaining ground, Woolies is still number one.
One shopping centre near me has both a coles and woolworths at opposite sides of the centre. Woolworths is always frequently busy but coles is usually quite empty. At about 7pm on a weeknight Woolworths needs 5-7 checkouts open but coles only one.
The carbon copy of this scenario is also on display if i turn right out of my drive way where there is a woolworths shopping centre and a coles one across the road. Woolworths has the busiest parking lot, and is frequently busy, coles once again has one check out person waiting for people to come in.
Woolworths with a consistent ROE at around 25-27% is the winner for me.
Andrew
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Also i should state that somewhere management seems to be making better decisions for Woolworths than Coles. Woolworths got into my area well before coles did and secured the best locations in the respective centres. This area was and probably still is a growing area so i was not sure why it took coles so long either they decided it wasn’t worth going up against Woolies or they didn’t see the potential.
Oh well Early bird gets the worm.
Tim
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Thanks for your thoughts Andrew.
Kim Jordan
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That doesn’t translate into the hardware business though Andrew does it – where Bunnings is almost choking on their early worm.
I own Wollworths shares, and shop at both Coles and Woolies supermarkets – and I’ve been concerned for a while about a few things:
– Generally Coles/Wesfarmers seems to be trying harder – and succeeding;
– I’ve long been concerned about the Dick Smith operations – they can’t seem to get that right, and it’s all taking too long trying;
– I’m concerned about their now massive attempts to knock Bunnings off their perch, and fearful of how this will affect the company.
Roger Montgomery
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The next step is to convert those fears to facts. What is the truth?
Andrew
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Hi Kim, your concerns with the hardware area are very valid. My comments were in regards to the supermarket operations where Coles are playing catch up, Hardware is also an area where Woolworths need to do some serious work. A lot of capital expenditure will need to be put in place and it could go either way whether it is successful or not.
If it works, there could be great upside in woolworths, if not than who knows, but i still expect Woolworths at its core will be a qualtiy company and still eb a better investment option than Wesfarmers.
Gina
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Hi Kim,
I agree with you especially about Dick Smith’s and it also will take a while to catch up with Bunnings. in hardware.
Also are they starting to lose the plot? with pet insurance?
I think some of the forecast earnings might be on the optimistic side.