3 Reasons to Buy SUPERVALU
Jul 6th 2012 11:46AM
Updated Jul 6th 2012 4:20PM
In order for investors to make an educated decision about their portfolio, they need to understand both the bear and bull case for their holdings. Today, analyst Austin Smith looks at the bull case for one of his own holdings: SUPERVALU. The the top of his list for reasons to consider buying the company today: its multiples. This company is incredibly cheap and priced like it's marching toward the grave. Admittedly, many investors believe that's where it will end up given the huge short interest around this stock, but Austin disagrees. The second reason Austin likes this company is because many macro trends play well into the company's position -- notably its emphasis on the lower-end grocery market. Consumers are increasingly putting their dollars on private label food items because of their more appealing value proposition, an area that SUPERVALU has room to grow into. The third reason Austin likes this company is that the key turnaround drivers necessary for it to catipult higher seem to be in place and are being executed on.
Of course there is a fourth reason as well -- SUPERVALU's huge dividend. Turnaround can take time, and in this case you can sit on a nearly 7% yield while you wait. Then again, the future remains uncertain for this company, and dividends require patience and a long-term view.
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At the time this article was published Austin Smith owns shares of SUPERVALU. The Motley Fool owns shares of SUPERVALU. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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