WOW - Woolworths Group

[notabclearning]

Make no mistake Woolworths current share price will be a long memory in five years. Its purely a great company and will continue to deliver great earnings.

 

[oxygen]

Make no mistake Woolworths current share price will be a long memory in five years. Its purely a great company and will continue to deliver great earnings.

And why is that?

 

[nulla nulla]

Make no mistake Woolworths current share price will be a long memory in five years. Its purely a great company and will continue to deliver great earnings.

But it keeps getting worse. And I thought wow was a defensive stock everyone turned to when the xao had a retrace. Looks like everyone else forgot to read the script.

Nice to see it bounce off the interday low of $26.23 to close on $26.51 but would love to understand why it (and WES) took such a shellacking this week?

 

[nulla nulla]

The recent sell off with the European and U.S.A sovereign debt fiasco/collapse took the wow share price down to lows not seen since the gfc. The recovery was just as quick as the sell off. Then the share price started to inch up in the period leading up to the release of the final profit report for twelve months ending 30 June 2011.



This is the part I don't understand. The share price improves in the lead up to the release of the report. Then when the report is released the analysts jump all over it:
"It is at the bottom end of expectations";
"It is less than expected";
"The forecasts are not high enough"; and
"And Coles is oh so much better".
Then the price gets slammed. Some wally puts a sell on it; the cfd shorters put a sell on it; the hedge funds borrowing shares put a sell on it; and after it has sold down a fair whack, the margin loan holders sell it down a bit more to adjust their leverage or exit their holding never to return.

It is becoming predictable. Why buy before the report, wait for the sell off then buy.

I have a "three day" rule. When the report is so-so but there is an apparent over-reaction, wait for the third day and buy in for the bounce. It doesn't always work, sometimes the share keeps falling. However, on average, this rule has served me well in the past. With advances in technology I find these days that you may need to be prepared to jump in after two days. I could be wrong, I often am however I jumped in today at $25.25.

This is not a recommendation, do your own research and be responsible for your own decisions. These are tough times to trade and our markets can go south on the hint of a greek default or no Q3 or a hurricane or earthquake etc etc.

But think of this. The dividend coming up is $0.65 per share fully franked. Franking at 30% means this is worth, say, another $0.20. Total value $0.85. If the market is right and the present value of wow is $25.23 (todays close) then the share should realistically drop to $24.38 after it goes ex-div.

Now look at the chart for the last 3 years then ask yourself, do you really see wow being worth the same now as it was at the bottom of the gfc. If the answer is yes, then don't buy it. If however you have read the profit reports for the last few years and you see, year after year, woolworths not only make a profit but increase the profit over and above the previous year then it must occur to you that they are doing something right. Increased sales, increased profits, increased earnings per share and increased dividends. And yet the market goes "Not good enough, sell".



Sometime you have to wonder if the analysts are working hand in glove with the hedge funds. Negative press, sell the share price down, accumulate then sell into the bounce making profit on both legs of the journey. Gotta laugh. The share price may drop further but I'm looking for a run up between now and the ex-div date. DYOR and good luck

 

[Bill M]

I have a "three day" rule. When the report is so-so but there is an apparent over-reaction, wait for the third day and buy in for the bounce. It doesn't always work, sometimes the share keeps falling. However, on average, this rule has served me well in the past. With advances in technology I find these days that you may need to be prepared to jump in after two days. I could be wrong, I often am however I jumped in today at $25.25.

Hi nulla, WOW is firmly on my watch list, top company in my opinion. I think your 3 day rule might work, QBE sort of went the same way. The only thing holding me back as a dividend investor is that the dividend is not quite high enough, only 4.5% FF. I can buy an ETF (with much less risk than a 1 company risk) that pays the same divi of around 4.5%. Having said that I really like WOW, if it drops below $25 on Monday then I might buy some as then the divi is nearing 5% FF. This is a good company and todays prices weren't bad, good luck to all holders.

 

[ROE]

Hi nulla, WOW is firmly on my watch list, top company in my opinion. I think your 3 day rule might work, QBE sort of went the same way. The only thing holding me back as a dividend investor is that the dividend is not quite high enough, only 4.5% FF. I can buy an ETF (with much less risk than a 1 company risk) that pays the same divi of around 4.5%. Having said that I really like WOW, if it drops below $25 on Monday then I might buy some as then the divi is nearing 5% FF. This is a good company and todays prices weren't bad, good luck to all holders.

I wouldn't buy WOW at $25, expensive as, it doesn't deserve this premium considering going forward, its cash flow will be impacted by the resurrection of Coles and an all out price war with Bunnings and people like Costco, Aldi snip around the edges

I buy under $20 and not a cent more when it get to $20 I may have to re-valuate before I jump in

 

[Tysonboss1]

I wouldn't buy WOW at $25, expensive as, it doesn't deserve this premium considering going forward, its cash flow will be impacted by the resurrection of Coles and an all out price war with Bunnings and people like Costco, Aldi snip around the edges

I buy under $20 and not a cent more when it get to $20 I may have to re-valuate before I jump in

I have thought that for 10years lol

Each time I think the are over valued, they pull a new business divsion out of the hat like a magic rabbit, and a new stream of profit growth follows.

Not saying this is what will happen with the Hardware, But it just might.

I'm not at all worried about Aldi or Costco or a price war with bunnings,

Disclaimer - I do not hold WOW, Would consider a selling a put if the strike was low enough though.

 

[notting]

I think the hardware thing is pretty stupid.
It's like they are chasing Wesfarmers instead of being way ahead of them to begin with.
Not so good for HVN though that they are going to persue white goods as part of it IMO.

 

[Tysonboss1]

I think the hardware thing is pretty stupid.
It's like they are chasing Wesfarmers instead of being way ahead of them to begin with.
Not so good for HVN though that they are going to persue white goods as part of it IMO.

I guess it depends on the format, and whether they can turn it into another business unit the produces durable cashflows.

 

[So_Cynical]

Hi nulla, WOW is firmly on my watch list, top company in my opinion. I think your 3 day rule might work, QBE sort of went the same way. The only thing holding me back as a dividend investor is that the dividend is not quite high enough, only 4.5% FF. I can buy an ETF (with much less risk than a 1 company risk) that pays the same divi of around 4.5%. Having said that I really like WOW, if it drops below $25 on Monday then I might buy some as then the divi is nearing 5% FF. This is a good company and todays prices weren't bad, good luck to all holders.

I've just freed up a large chunk of money (see MRE thread) and feel WOW is screaming "buy me" but cant help but notice the dividend is somewhat woeful Bill do you have any capital "at risk" ?

 

[Tysonboss1]

I've just freed up a large chunk of money (see MRE thread) and feel WOW is screaming "buy me" but cant help but notice the dividend is somewhat woeful Bill do you have any capital "at risk" ?

The over all profit they make per share is more important than the dividend per share. If I am the owner of a good business with plenty of expansion options and they made a $1000 profit, I would not mind them only paying out $500 in dividend and having them reinvest the other $500 earning perhaps 25%.

 

[Bill M]

Bill do you have any capital "at risk" ?

My whole darn portfolio is at risk, the only thing that is risk free right now is cash in the bank but unfortunately that won't pay the bills. But I know what you mean, WOW is not a company I would be worried about going broke.

 

[oldblue]

Certainly not worried about WOW going broke. But the SP is back to where it was four years ago, the yield is only so-so, and the growth appears to have settled back to lower levels.

I admire WOW as a well run company with a strong position in its sector but it doesn't appeal as a Buy at present.

 

[ROE]

I have thought that for 10years lol

Each time I think the are over valued, they pull a new business divsion out of the hat like a magic rabbit, and a new stream of profit growth follows.

Not saying this is what will happen with the Hardware, But it just might.

I'm not at all worried about Aldi or Costco or a price war with bunnings,

Disclaimer - I do not hold WOW, Would consider a selling a put if the strike was low enough though.

still wont buy above $20 that is my analysis
dismissive your competitor could be a big mistake, especially the good one...

Costco is debt FREE and very well managed company with Charlie Munger mix, Coles is a well managed company now
how much debt woolie rack up in recent year to keep up the earning, the time will come where debt becomes a burden

I tell you soon a story I uncover where Woolie is worry about Costco

 

[nulla nulla]

Woolworths probably welcomes costco finaly coming to Australia. The "shrinkage" appears to have moved from Woolworths to somewhere else, especially the "shrinkage to order".

 

[nulla nulla]

Sold the $25.25 parcel today at $25.72. Didn't like the re-testing this week of the $25.07 bottom after tapping mid $25.60's and when todays xao started to pull back I figured it was a good idea to take some profit in case we had another sell off. Looks like there are still a lot of investors willing to sell into any sort of bounce.

Also the media and the market may have to allow the Hardware start-up some settling in time. If tonight is a downer internationaly we are likely to have a down day tomorrow. The usual Friday sell off after 2:00pm could provide a re-entry. Will re-enter if there is any sort of decent retrace to $25.30 or lower. (Still hold 2 parcels).

 

[notting]

That's funny.
I averaged in some more today around 25.35. Thinking there will be some excitement about the new hardware thing!
WES did a bit of a fear drop with good volume. Maybe they felt the same as me! Nervous about competition.
If the markets week tomorrow, you't think WOW would be stronger given it's cum dividend and a defensive!
It will be interesting to see if the stores are really appealing to women. They look pretty intimidating on that level to me!
I should have shorted WES and made it a pair! Stupid cow!

 

[nulla nulla]

That's funny.
I averaged in some more today around 25.35. Thinking there will be some excitement about the new hardware thing!
WES did a bit of a fear drop with good volume. Maybe they felt the same as me! Nervous about competition.
If the markets week tomorrow, you't think WOW would be stronger given it's cum dividend and a defensive!
It will be interesting to see if the stores are really appealing to women. They look pretty intimidating on that level to me!
I should have shorted WES and made it a pair! Stupid cow!

WOW traded today between $25.74 (high) and $25.42 (low). Is your average $25.35? (todays purchase in this range with a lower purchase earlier in the week?)

The press about the hardware stores has been a little negative, in that the rollout and opening of stores may take longer than expected. I suspect this has influenced some investors to hold back. Accordingly the bounce after the negative report has been minimal.

The share is currently cum-div and there is a week or so of trading left before it goes ex-div. Could be some room for further dips before it climbs in the run-up to going exdiv.

 

[notting]

WOW traded today between $25.74 (high) and $25.42 (low). Is your average $25.35? (todays purchase in this range with a lower purchase earlier in the week?)

Yep picked up some yesterday too.

I thought the press has been quite charitable with regard to the big opening!
I'm probably not going to be in it for long but if I am that will be fine.
I felt it might get a bit of a wave up to it's dividend.
I'm not expecting dips unless there is a general tank.
I'd say flat at worst then a little nasty after that if markets are skittish around pay day!

 

[nulla nulla]

Yep picked up some yesterday too.

I thought the press has been quite charitable with regard to the big opening!
I'm probably not going to be in it for long but if I am that will be fine.
I felt it might get a bit of a wave up to it's dividend.
I'm not expecting dips unless there is a general tank.
I'd say flat at worst then a little nasty after that if markets are skittish around pay day!

The following is a link to The Sydney Morning Herald Business Day article "Has Woolworths lost its' WOW?" Scott Phillips 01 September 2011.

http://www.smh.com.au/business/has-woolies-lost-its-wow-20110901-1jnpa.html

Fairly neutral overview, the past is the past and the future is looking tough. However he does make the point that Woolies keeps on keeping on growing and making bigger profits year after year. Current price levels could be as good as it's going to get?

Then again the djia and the dax were down overnight. Also the u.s.a. is expecting poor job figures tonight so there could be further downside comming. I will be looking for re-entry prices today.