Wm Morrison Supermarkets (MRW-LSE)

(Market Call Minute.) The supermarket business in Britain is still undergoing deflation pressures on prices.

(A Top Pick Oct 24/13. Down 38.74%.) He put this on the books because it had a certain amount of stability. The real estate on the books was substantially larger than the debt outstanding so he figured there would be a fair downside protection. Introduction of discount retailers from Europe aggressively changed the margin aspect. Sold his holdings. Still has a strong balance sheet and he feels the dividend is safe. Actually feels this is a buy at these levels.

Grocery business in England is similar to here in that it is highly competitive, and has slim margins. It is hard for him to see where you were going to get growth in earnings. Has avoided this whole sector for many years.

This was a great company in the past, but feels they have overextended, which has hurt them. There is a lot of competition, not only on the pricing side but from the discounting arms in the UK as well. Because they over expanded, their cost structure is way out of whack.

Basically the discounters have really disrupted the food retail market in the UK so effectively margins have been compressed. This is a good story with a very strong balance sheet. Dividend is safe. They were just getting ready to issue £2 billion of buybacks and dividend increases when this occurred. If you have longer-term money, this is a good value at around £1.90. Dividend is safe.

(Top Pick Feb 13/13, Down 4.54%) He likes the real estate in this one. The market is disappointed that they have not done the real estate refinancing. Could be a once time dividend or share buyback. It’s on sale.

The catalyst here is that it pays an attractive dividend, is vertically integrated and has a good balance sheet. They are going to monetize some of their real estate portfolio. A gradual monetization of that up to about 70% could realize up to $2 billion worth of capital, return to shareholders in either the form of a special dividend, a dividend increase or share buyback. Very good management team.

(A Top Pick April 12/12. Up 1.36%.) A distinguishing characteristic of this supermarket is that it is vertically integrated which is really taking costs down. Still likes and it is performing quite well.

For individuals that want a decent dividend with a slight growth profile and at a discount. Very strong balance sheet; owns 90% of its real estate. They could list their real estate assets out into a REIT, which would be highly accretive. Have some new store formats on the fresh food front that is growing. 4.24% yield.

(Top Pick Apr 12/12, Down 5.56%) Raised dividend by 10% and bought back 7% of shares. There is some sell off because of recession concerns. Longer term a good story and a dividend grower. 2-3 years. 4% dividend.

(A To Pick April 12/13. Up 3.5%.) (London stock exchange.)