27 Jul SOLD OUT: SUPERVALUE INC (NYSE:SVU)
JULY 27, 2017, SOLD 500 SHARES OF SVU @ USD$31.80 PER SHARE (2% OF PORTFOLIO)
Today I sold all of my shares in SVU at around USD $31.80 per share, realizing a gain of 63% on the holding. The firm is being purchased.
JUNE 5, 2018, BUY 500 SHARES OF SVU @ USD$19.09 (1% of the portfolio)
Today I purchased 500 shares of Supervalu Inc. Supervalu is a grocery wholesaler, supplying major grocery chains such as IGA. My investment in SVU continues my interest in the battered retail sector. I see value in the retail sector since many investors have sold down shares in retail companies due to the real-threat that various on-line retailers, namely Amazon, pose to the status-quo of the retailing industry. While I believe the threat posed by the on-line retailers is real, I also know that management at many retailers have time to adjust to the threat. SVU’s business is somewhat protected by immediate attack from on-line retailers. SVU operates in the wholesale space, with a limited exposure to direct consumer sales. The business offers very low margins (3% on USD$16 billion in sales), however, the margin is stable and the business generates reliable free cash flow.
I am purchasing SVU at a market capitalization of USD$650 million; the business carries a large debt-load of USD$1.8 billion, however, I expect this to come down about USD$100 million per year from generated free cash flow. I expect SVU to earn about USD$2.75 per share in 2018, and a bit higher in 2019. They have very rarely ever lost money in any economic cycle and I feel good at buying in at these levels. We will see how it goes…the investment is just slightly more than 1% of the portfolio.