High Yielding Shares Again

Erko said:
I just cant push the button on more WOW, given what has happened in the UK to the once unassailable positions of Tesco and Sainsburys at the hands of Aldi and Lidl and the like, I think WOW and WES might be in for significantly tougher times in the next decade. Aldi has doubled its market share in Oz the last 5 years to 10%. WOW may be a value trap at this price.
My 2 cents only of course :D
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You might be right Erko...but what I have been doing over past several years is

1) Buy veggies and fruits from farmers market. Way cheaper than all supermarkets.

2) For everything else I find 80% of the time when buying stuff from Woolies I tend to buy products (eg. bread/juice/cheese etc.) which are on specials (20-30% off) along with their homebrand products (sugar/salt/ketchup etc.). My grocery bills hardly exceed my allocated budget.

3) And for products that I am particular about (Nutella, Connoisseur ice cream, Nutri-Grain Cereals etc) I always walk through the isle and buy heaps whenever they are on specials

I have been to Aldi several times but have been frustrated with lack of certain products not available and those that are available lack variety and are usually similarly or higher priced than same products from Woolies which are on special.

So as long as you are flexible Woolies can be cheaper option. Same goes for Coles I guess if you buy stuff from there.

My own experience has been Aldi is not always cheaper. Haven't been to Costco so cannot confirm if it is any cheaper.

Cheers,
Oracle.
 
Erko said:
I just cant push the button on more WOW, given what has happened in the UK to the once unassailable positions of Tesco and Sainsburys at the hands of Aldi and Lidl and the like, I think WOW and WES might be in for significantly tougher times in the next decade. Aldi has doubled its market share in Oz the last 5 years to 10%. WOW may be a value trap at this price.
My 2 cents only of course :D
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Aldi are expanding hard, as well. There's at least 4-5 new stores opening around NSW at the moment along with refurbs of their existing to add liquor sections etc.
 
Oracle, I am not high conviction on this position, holding both WOW and WES and no intention to sell....but have seen Aldi's coverage and product offer improve markedly in recent years. From 2 years ago not being an Aldi family, to a probably 30% Aldi family this year I can see things changing. You are right, the F&V sucks, but the boxed foodstuffs is where they have the edge.

There is also probably room for WES and WOW to grow further in the next few years, beyond that it will get harder. I don't see them falling off a cliff, but at 17x and 21x approx. they are pretty expensive given what I see as their growth prospects in Australia (and I don't want to think about them having a tilt overseas).
 
Have added to my WOW holdings. Now hold approx 12000 WOW at average cost of 35.23. Pretty alarming to drop 5% in one day to close at 34.19.
 
There are more Aldi clones coming, I think it is Lidl that is almost ready to act and others are actively looking at OZ.

The highest grocery margins in the world means more will come in the future.

From memory, the average worldwide margin is 16%, WW and Coles are over 25% so every grocer in the world wants to be here :)
 
I like WOW and WES because they have a good moat. It is not easy for new players simply to break in and get a hearty share of the pie. The two of them control the suppliers and the customers such that they can adjust profit margins, sales and expenses as desired. Few companies have such a stranglehold on essential services nationwide.

I have visited Aldi but feel that their product offerings and presentation are just lower quality and that most consumers, if they can at all manage, will prefer Woolies or Coles.

WOW also has good dividend stability and a constantly high return on equity. Their debt to equity ratio is also low. Despite the 5% drop today, I don't think any less people are going to shopping at Woolies today or tomorrow.

So hence, I hang on.
 
Both WOW and WES are not just supermarkets. They are also property owners, bars, clubs and nightclub owners, insurance companies, and the like.
 
chilliblue said:
Both WOW and WES are not just supermarkets. They are also property owners, bars, clubs and nightclub owners, insurance companies, and the like.
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Correct, so well diversified businesses with multiple income streams. They have the means to recover and thrive if groceries or hardware stores are under siege.
 
WES is a diversified conglomerate, WOW is a grocer. WOW spun off its property into SCA 2 years ago. Masters is bleeding money, have a look at the income streams, it's a pure play grocer despite having some other divisions. They are very different businesses.
 
Erko said:
WES is a diversified conglomerate, WOW is a grocer. WOW spun off its property into SCA 2 years ago. Masters is bleeding money, have a look at the income streams, it's a pure play grocer despite having some other divisions. They are very different businesses.
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WOW also runs Big W, Dan Murphys etc. I accept that Masters is bleeding but if WES/ Bunnings is a competitor unchallenged in the hardware arena, WOW has to respond because otherwise there is a monopoly which will provide an unstoppable warchest.
 
Yeah look as I said I hold both. I'm not saying they are bad businesses, but for me, at current p/e and outlook they aren't buys at anything more than index weight :)
 
WOW companies

Woolworths/Safeway Bricks and mortar and online groceries
Food For Less/ Flemings
Thomas Dux Grocer
Macro Wholefoods Market
Beer Wine Spirits (BWS)
Cellarmasters
Dan Murphy's
Langton's ? Wine auctioneers and retailers
Woolworths Liquor
ALH Group ? Hotel and Poker Machine operator 75% owned by Woolworths
Caltex Woolworths/Safeway ? Petrol stations
BIG W
Everyday Rewards
Everyday Money
Everyday Mobile Pre-paid mobile service running on the Optus
Masters Home Improvement
Progressive EnterprisesNew Zealand supermarket chain 104 full-service discount supermarkets, operating across the North and South Islands of New Zealand.
Foodtown 20 full-service supermarkets, operating in Auckland, Hamilton, and Tauranga
SuperValue
Freshchoice
Woolworths @ Gull
India
Croma/Tata Group Venture Woolworths wholesale to Tata Group of India

I personally hold WES shares and have done so for some time as my thoughts are that they are the stronger player.
 
china said:
I topped up too early yesterday at 34.27.:(
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Look at their dividends.

Currently at $1.37 fully franked represents gross yield of 5.71% on purchase price of $34.27 and forecast to increase to $1.45 this FY. Their payout ratio is around 70% so reasonable buffer before their dividends has to be cut.

Lastly, they reported 3% increase in sales so they are still growing, nothing to worry there. With their economies of scale the 3% increase in sales can easily translate to >3% increase in profits. Hence, they have decided to maintain their net profit guidance for this FY of about 4 to 7% higher than previous FY.

Mr O'Brien said there was no need to revise guidance for 4 to 7 per cent net-profit growth and he expected Christmas this year to be "just as good" as last year.

"We're confident the plans we've got are going to deliver what we need in the second quarter - if there was any change in our guidance I'd be mentioning it today," he said.
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Read more: http://www.smh.com.au/business/reta...disappoint-20141103-11gaaz.html#ixzz3I428qHba

Look at the facts. Over the short term market can be irrational driven by sentiment. I clearly remember 3 or so years ago when I was buying individual shares similar stories coming out when Coles was making strong gains over Woolworths causing its share price to go under $25. These things keep happening time and again. Bottom line is WOW is a solid business with good moats. They are the largest supermarket chain in Australia and Coles is still far way behind in catching up.

Cheers,
Oracle.

(PS: I do not hold WOW shares anymore since I now only invest in index ETFs)
 
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