Kroger Co. (KR)

Gaining share the last few years. The market is worried about food price inflation. You will get double digit earnings growth. 14 times earnings and great dividend growth. These guys are great at execution.

They are across all the US and are the largest market share in terms of business that also has a niche play into affordable organic foods, which was only launched 2 years ago, but represents $1.2 billion of their annual sales. They recently made an $800 million acquisition and got 24 new grocery store locations, giving them access to Wisconsin and the Mariano’s name in Chicago. They are #2 in terms of market share, 2^nd only to Walmart. Dividend yield of 1.22%.

They have done a great job of growing same store sales. They are the largest grocer in the US. The whole industry could use a little inflation, which is good for grocers. The difficulty he has right now is the valuation. It is a good company, but not such a good stock.

A lot of investors have been hanging out in these highly defensive names, which are trading at pretty big PE multiples. The whole business is getting very competitive. Consumers are changing their shopping habits, and grocers are going to have to make increasing efforts to remain competitive. You also have to worry about food price inflation. There are better areas to be invested in.

Stock has been moving sideways, but still paying a decent dividend. He likes this company given the fact that the US domestic economy and environment is improving. That should help a name like this. Thinks they will improve on their sales growth and their margins as the company benefits from its expanding offerings of wider margin type of business, including organic foods and natural foods and private label foods. Pays a moderate dividend of 1.1%.

One of the biggest supermarket chains in the US. This has been an attractive area because it is purely domestic and earnings have been growing as they’ve been consolidating some of their stores and cutting expenses. This has been boosting profitability. The stock has done very well.

It has had a pretty good run and it is not attractive from a valuation point of view. It will pullback more than others in a market correction.

Likes the sector and likes their latest acquisition. These are low margin/low growth vehicles. This one has had a good run this last year because of the safety of the business. This is one of the best managed stores. Has a very good presence in a number of markets.

Chart shows a big upward parabolic move off of the trend line earlier this year. It had to be corrected and it did and now it is starting to move out again. In technical language, this could be called a “down flag” in an uptrend. Stock looks great.

Amazing comeback story. They figured out how to handle Walmart. There will be very little growth in the whole business. Grocery store space is growing faster than the population.