Loblaw Companies Ltd (L.TO)

(Top Pick Nov 25/16, Down 4.82%) Food deflation is the headwind. They are different than traditional food grocers because they have Shoppers Drug Mart. They now have about a 30% share in food retail as well as in drug retail. They still have a lot of room to improve their margins. This is an attractive entry point to buy this one.

He likes the sector. It has some merit.

It is hard to be negative on this company. They are a large cap long-term performer. He has liked this ever since they made the big Shoppers acquisition and he thinks they will continue to derive value and margins from this acquisition. It allows them to cross sell.

He did own it and sold around $72. He has been tempted to buy it back here. There is a lot of talk about food deflation. This is difficult for grocers. Multiples are coming down. He is looking at it and thinks you are alright to buy it here. He is waiting a little bit longer to pick it up.

People have been concerned about this because of food inflation issues. Shoppers Drug Mart has been executing very well for them. He is modelling 12% EPS and 3% dividend growth over the next couple of years. The food inflation rise is over, but they are focusing on more volume, cost cutting and negotiating with vendors. Trading at a good valuation relative to their 5 year. He is buying at these levels.

(A Top Pick Sept 9/15. Down 0.08%.) It was doing quite well, and then pulled back in the last month. Their financial results have been very encouraging. Strong same store sales. She continues to like the grocery space in terms that competition within square footage growth has lessened than it was a few years back. Also, likes Shoppers, the acquisition they did a few years back. They are starting to buy back shares.

(Market Call Minute.) This and the other food companies are not a place that he wants to be right now because there is now and is going to be food deflation. You want to own supermarket chains when there is inflation.

(Market Call Minute.) He likes this. It is part of that safer defensive part of your portfolio.

She likes the grocery business because the square footage growth has been moderating, and this company has different multiple formats. They have implemented a new SAP IT systems and are starting to see the benefits of that. She also likes Shoppers, their drug retail business. Dividend yield of 1.47%.

Loblaw’s (L-T) or Metro (MRU-T)? Doesn’t think you can choose between these 2. It is sort of back-and-forth. They both have engines firing on “Go” right now. He would possibly switch out of Metro and go into Loblaw’s.

Fabulous management and great market share. Their purchase of Shoppers was fabulous. It is a bit expensive. There is some talk that they are going to spin out the gas station part. It is hard to see it going up a lot from here, however he doesn’t see it going down a lot either.

Thinks that there is growth in this stock. It speaks to management of being very strategic about the assets that they are buying, such as Shoppers. This is going to be slow and steady growth.

(A Top Pick June 9/15. Up 11.8%.) Had originally bought this because of the Shoppers acquisition. She likes both industries. In terms of grocery retail, there has been moderating square footage growth. They are now starting to buy back stock and increasing the dividend. Shoppers has about a 30% share in drug retail. They have good locations and it bodes well with the demographics of the aging consumer.

Doesn’t think we have seen the full benefits of the whole synergy between Shoppers and Loblaw’s. Also, feels the issues that have occurred for about 5 years have been really turned around and solved.

One of the bigger supermarket chains in the country, and since they bought Shoppers Drug Mart they have gotten even bigger. Have done a good job over the last couple of years to straighten out their information systems, lower costs and getting more competitive. However, at this point, the whole grocers’ space is somewhat challenged because of high food inflation, the Cdn$, and renewed competition. Feels growth from this point on is going to be slow, but he would continue to own it.