Metro Inc (A) (MRU.TO)

Loblaw (L-T), Empire (EMP.A-T) or Metro (MRU-T)? Loblaw has proven to be the best run grocer in Canada. Empire has had its challenges but is starting to come back. This company would be somewhere in between the two.

This typically does really well from April to July, but once you get into July, it tends to move lower. We are now past the period of seasonal strength. Stay away from this for now. There are other opportunities.

Very well-run in Canada, but has been under pressure recently due to Amazon’s acquisition of Whole Foods, which has pressured US grocers to a much greater degree. Reduced his position in the mid-$40. Well-run, and at the right price, the kind of company you can own, but be mindful that longer-term there is a potential margin and headwind from various technologies that are changing on how Canadians are buying groceries. The present price is fair.

We saw what just happened with the Amazon Whole Foods acquisition, which sent shivers down the spine of the US grocery retailers. There was a little less reaction in Canada, but it does put Canadian grocers on notice. There is the health reform in Québec and the minimum wage situation in Ontario. These are some of the issues that have made the stock go sideways a little. His preferred way to play grocers would be Loblaw’s (L-T), but he doesn’t own any grocers right now.

(A Top Pick May 19/16. Up 0.26%.) Sold this late last year, in order to move into the more cyclical areas. The sector has intense competition. He isn’t too interested in this space.

(A Top Pick March 15/17. Up 15%.) The period of seasonal strength is right through until the end of July, so the seasonality is still great. Technicals are clearly on the upside. They just came out with some very good news on earnings, which continues to improve. Continue to hold.

Looking out over 20 years, this has been one of the best performing stocks out there. Has a lot of respect for management. They are excellent at allocating capital and at operations. Shares have pulled back recently because of inflationary concerns, but when he looks at this over the long-term, nothing has changed. Although there is a bit of inflation now and a little bit of competitive intensity in a weak economy, they have dealt with this before and will deal with it again. The multiple has pulled back to what he thinks is a fair number for long-term holders. Dividend yield of 1.6%. (Analysts’ price target is $45.50.)

This is his trade to hide somewhere in Canada. The chart shows this is in a long-term upward trend from 2014. In the last few days, the chart shows it has formed a gorgeous double bottom pattern, and is finally showing signs of improvement. It has already outperformed the Canadian market. It also does well in the summer, as defensive stocks do much better at that time. Seasonally, this does well from around now through to the middle of July. (Analysts’ price target is $45.50.)

A tough business, but a business we all need. The margins are small, but it continues to be there. We all have to grocery shop. Longer-term, the business continues to improve. They charge a little more and their margins are slim, but they make more money. Because it has sold off as much is it has, he would be more tempted to buy this than when it is higher up.

Recently sold his holdings. Looking at the macro picture, he is stepping more into cyclical names, and away from defensive, low volume, high dividend type names. Probably wouldn’t want to own a lot of consumer staples. He is zero weight in consumer staples. There is lots of competition with Loblaw’s, Walmart, etc.

There has been a big shift from some of these stocks. This one had done exceptionally well for the prior couple of years. Still a class act and continues to show some earnings growth, but valuation multiples are coming down a little. Within the sector, he would probably be more inclined to buy Loblaw’s (L-T), because he could get a more bullish, longer-term story with the Shoppers acquisition.

The long-term track record is outstanding. Feels they are the best grocer in Canada, but it just comes down to what you want to pay for it. Has an ROC of 17% currently, which is actually up from 2 years ago. It currently looks a little bit rich and is stretching his valuations to the max.

The uptrend is broken. It is a bit of a negative looking chart. Don’t buy a stock that is doing this right now.

MRU-T vs. L-T. Neither one are favourite because of the competition. COST-Q is opening more stores. Wal-Mart is here with food as well. You are starting to get some food inflation which they are having trouble passing on to consumers. L-T has Shoppers and so he prefers it. He is not particularly thrilled with it either one, however. You would have to wait for Empire’s acquisition of Safeway to be fixed to consider it.

The issue is that it got right up to its FMV and then, like so many senior stocks, it quit. We are now at a juncture waiting for some kind of a pullback, enough that we can get another trading run. Because there is such relatively little upside, about 13%-14%, he wouldn’t go into the stock. His concerns would be because of market hype, etc. and there may be more downside ahead of you.