Loblaw’s Market Update

Loblaw’s reported very positive earnings this morning, helping solidify our thesis in the company. Below is our analysis on the company, which also translates to other companies that we own in the grocery industry.

Our key thesis on Loblaw’s can be summarized as follows:

- The company is trading at two decade low valuations and is one of the better bargains in the today’s market (see chart 1 and 2).
- The extremely low valuation is attributed to multiple years of negative news regarding operations and the industry; thus, like any value stock with low expectations, it does not take much to lift the price of the stock (see chart 3).
- A good example of a comparable company is Safeway, which we have been building a stake in lately for our World Fund. Another turnaround story which seems to have put in a multi year bottom and has begun to see some gains (see chart 4).
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