Hello Share Scrapers. Companies essential in the way the business world turns have a stronger chance of growing their share price than most other concerns in this very dodgy economic climate. One such outfit is Bunzl (BNZL), a massive Footsie distribution company sending out stuff that’s important to other companies all over the world.
An "excitable" Monday on the markets! I see that it has helped pull the FTSE 100 back to a small loss year-to-date. Well at least it is a lot better than peers in all the rest of the developed world. Meanwhile, did you see the headline that “Asda and Morrisons drop prices to help struggling shoppers”. So what does that mean for names such as Tesco (TSCO), J Sainsbury (SBRY) and Ocado (OCDO) among others?
Results day at Tesco (TSCO) and a new chief executive leading the presentation of the numbers. Ken Murphy took over last week from ‘Tesco Dave’, David Lewis, the man who pulled the UK’s largest food retailer back from the brink of an accounting scandal and multiple missteps of direction. Apparently it is ‘Serving shoppers a little better every day’ and that it is able to say this is as ‘Tesco Dave’ did a pretty good job. Today’s update for the six months to the end of August noted that ‘over a million customers more loyal to Tesco…Net switching gains from Aldi for first time in over a decade…(and) Online capacity doubled in five weeks (as Covid-19 hit)’. This is far from shabby at all…
I noted last month that the Competition and Markets Authority (CMA) really did not help out Sainsbury's (SBRY) with its aim to merge with Asda and push back positively against some of the negative trends it is facing in today's UK food retail market, by asking for lots of store divestments (300 versus the 150 originally offered). This is why Sainsbury's shares are skulking around a one year low.
Aside from a couple of brief comments on its new discount offering Jack's, the last time I wrote substantially on Tesco (TSCO) was six months ago - when I concluded that there was another leg in the share price to come, which duly resulted. But the wheels have come off the shares in the last couple of months. I still remain unconvinced by Jack's but in the wider scheme of things in the Tesco empire it is a rounding error. I think the real issue however is that Tesco is now no longer a recovery stock and - as we all know - it is easier to travel than arrive…
In my preview of Ocado’s Q3 trading statement, I suggested that the market cap was probably just too big. The statement released this morning is a win for the shorters as the shares retreat 14% to 276p.
The Ocado (OCDO) share price remains volatile, as investors try to figure out whether this unusual business is headed for success or failure. Short interest remains incredibly high, and currently represents about 17.5% of shares outstanding, making it a top 3 bear target in London! Let’s take a look in advance of next Tuesday’s Q3 trading statement.
Earlier this week, I covered Fevertree and noted that despite the extraordinary earnings multiple attached (100x the most recent six-month result), I thought a portfolio of similar companies might do reasonably well over the long-term. Of course, this would require that we succeeded in finding at least a couple which did fulfill their organic growth potential – not easy – and held them for the long run. This morning brings interim results from Just Eat (JE), and the features are somewhat similar.
A month ago global equity markets were in a state of complete panic. Four weeks later markets are substantially up, sentiment has hugely recovered and investors are generally looking forward again to 2015…especially in the US. Despite the market recovery of recent weeks the world remains clearly imbalanced. That’s not to say there are now things to be doing and the technology, food retail and gold sectors were of particular interest to me this week.