Loblaw Companies Ltd (L.TO)

They will get involved in online shopping. There is heavy competition in this space and heavy price discounting. Loblaw is probably the best in this sector. Is a well run company. Groceries are a stable and somewhat defensive.

MRU-T vs. L-T. He has owned both in the last three years. Earnings were down 3% for MRU-T even though sales were up. L-T is facing the same problems. There are overall challenges in the whole group.

Avoid this sector. Competitive, paper-thin margins. Other sectors pay better dividends and have less volatility. Not enough of a dividend to justify holding through the sideways motion.

This is a recent addition to their portfolio. Loblaw runs some dominant banners in both grocery retailing and pharmacy. Have accelerated their organic growth with the purchase of Shoppers Drugmart. They have gained market share and shown margin improvement. We like what they are doing operationally and financially. Stock is trading at 14X earnings. The value of growth and consistency in this name is exceptional. (Analysts’ price target is $76.92)

Will Shoppers Drug Mart be the top distributor of medical marijuana? He doesn't know. But the problem here with Loblaw is competition from Amazon and small indie grocers. That's why this stock has been sideways.

Long-term it looks tough for them, with serious competition from Walmart and Costco. Loblaw is trying to cut costs and enhance its digital operations. Same-store sales are sluggish, though Shoppers is doing better. More headwinds: generic drug pricing, minimum wage rises and the US exchange rate.

He owns no grocers now. Loblaw faces the Amazon threat, as well as Walmart and Costco competition. He doubts Loblaw can maintain their margins. Shoppers Drug Mart though is rock solid. Look elsewhere.

Reasonable in terms of a longer term outlook. They sell products that everyone needs: food, and pharmaceuticals and beauty products through Shoppers Drug Mart. Good positions and locations in both those segments, which are critical for those types of businesses. Experienced operators. The industry is in transition regarding goods delivery and pickup. They have click and collect, and have introduced online delivery. Some headwinds with minimum wage, which they’re now overcoming. Earnings growth not that stellar. Going forward earnings should be in mid to high single digit range. Stock is reasonably priced at around $65, with a bit of a yield.

He recently bought this. Cash flow and earnings have ticked up, though the stock has been sidways the past few years. They've done well integrating Shopper's Drug Mart. They are massively buying back stock. Also done well growing No Frills, a growth opportunity. A safe, defensive name with room to grow. Pays a 1.8% dividend.

Revenues are flat for the grocery sector. They bought back 5% of their stock and so earnings per share are going up. He would stay away from the sector because of the lack of top line growth.

(Past Top Pick on April 26, 2017, Down 12%) Expenses rose $100 million due to increased costs to cover higher minimum wages. Also suffered from increased competition. He sold his shares along with other food stocks. Earnings will grow 3% this year.