I love good stocks when the market is ignoring them. One stock that has been put in the bottom draw by many investors, including myself, is The Warehouse Group [WHS.NZ].But just because a stock is out of favour by the market or not in the news doesn't mean you should forget about it. In fact if you are canny you should probably be more than a little contrary as others are looking at other more "newsworthy" companies.
I have kinda forgotten the red shed myself, I have had WHS shares in the Share Investor Portfolio for a number of years and have done a little bit of reading lately on the company and I like what I have to read.
Profit has been steady during the this recession (so far) and the cash continues to roll in as shoppers look for bargains.
Add to this a couple of stories, one from a month or so back from Bloomberg and one out today covering the Woolworth's Australia profit and things start to look a little more interesting for The Warehouse.
The Bloomberg piece covers off Woolworth's capital management and alludes to either a stock buyback for its own scrip or a "major" purchase in the offing, suggesting The Warehouse as a target.
Another article by Reuters confirms a bumper profit for Woolies, so they are free flowing with lovely green stuff.
The purchase/buyback scenario will probably be confirmed by the company when it reports its profit in August.
I bought 7000 shares today at a combined value of approx NZ$26,000.00 @ an average share price of $3.72.
My incumbent shareholding in this company, 8000 shares, was bought originally at $6.05 but I hold at a cost of $5.05 after dividends and tax credits are added after holding for 1.75 years.
I am happy to buy Warehouse shares and forget about them again but there is a distinct likelihood that either Woolworths or Foodstuffs, Woollies competing bidder, will make a play for the company in the medium term.
The bid for The Warehouse has been held up in litigation between the 3 parties involved and as I wrote back in January in When will the Warehouse bidders make their move? the process has now ground to a halt after the Commerce Commission won their case in the Appeal Court almost a year ago and Woolworth's sought leave in the Supreme Court to have that decision quashed a few weeks later.
Many things have changed since then, the major stumbling block to the takeover, the Extra format stores, has been dropped and economic conditions have made the retail environment even more competitive.
Watch this space.
The Warehouse Group @ Share Investor
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Discuss this stock @ Share Investor Forum
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