Safeway Inc. (SWY)

(A Top Pick June 26/13. Up 68.68%.) Trading relatively cheap compared to its US peers, and extremely cheap on the Canadian side. Had an extremely robust Canadian business. Significant value was created by selling their Canadian division. Exited when it hit his $30 target.

(A Top Pick March 22/13. Up 40.95%.) They are being acquired. Ahead of this acquisition, they are going to spin out the Black Hawk, which they own a majority of. Sold about a 3^rd of her holdings and is going to wait to find out more about the Black Hawk situation.

Trading at 30 times estimated earnings. Talk of private equity getting involved. Sector is not one of the leading ones. Defensive ones have done better over the last few weeks. This not the best place to be focused. Estimates in general have been coming down for the stock. He would take the money and move on.

If you own, he would be tempted to take trim a little. Did well with the sale of their Canadian operations. Valuations have moved somewhat higher. There is more competition in this space.

Not a bad company. Had a nice run. Stock is no longer cheap. It will be a market performer.

Supermarket industry in North America is tending to do a little bit better. This has not been one of the best run companies but has benefited recently by the sale of their Canadian division to Empire (EMP.A-T). He would use any strength in the stock to get out.

This has been an interesting story. Has been a little bit of a real estate play. Not his favourite name in the space.

Just sold their Canadian business to Empire Co (Sobeys). This is the last, big, attractive consolidation play in the grocery space in Canada. Stock went from $23-$29 where he sold his holdings. Stock has now dropped back to $23 and he feels the market is missing the picture here. They are going to get $4 billion net after taxes and will spend $2 billion to pay back debt and another $2 billion to buy back stock. Yield of 3.4%. Has a target of $27-$30.

Has been under pressure. Had boring earnings and some operational issues and they were buying back stock and putting the debt on the balance sheet. Had a tremendous 4^th quarter. Big turnaround. Took their financial card public, which will help clean up their balance sheet. Expects that in a year or 2 they will be buying back stock again. Dividend yield of 2.72%.

In a difficult space. Reality of the grocery business in North America is that there is more square footage growth than there is population growth, from the likes of Walmart (WMT-N), discounts and even Dollar stores. Very levered company with over $5 billion of debt and no top line growth presently. Earnings are not growing. About 4.5% dividend.

This is a food industry that has very, very small margins so it is tough to make money.

CEO is retiring in May. Doesn’t following this closely. This is a very mature sector. People hold this for a defensive name. It is a competitive industry. She had L-T a year ago and then got out of it. Would not go into this sector.

Problem with US food retailers. Margin Squeeze. Has been a major value destruction in this stock so stay away from it.

Groceries is a tough, low margin business and has gotten tougher because of Wal-Mart. Has taken on $2 billion of debt to buy back a 3^rd of their shares. Paying a dividend of 4.5%. Not crazy about a company in the low margin business that is having trouble delivering same-store sales growth, levering up the balance sheet. They are losing ground.