ASX Shares No luck with Woolworths shares (WOW)

Discussion in 'Shares & Funds' started by Darlinghurst Boy, 29th Dec, 2015.

Join Australia's most dynamic and respected property investment community
  1. jrc

    jrc Well-Known Member

    Joined:
    20th Jun, 2015
    Posts:
    260
    Location:
    Regional NSW
    Big W might be better with an everyday low price policy.

    The new rewards card is dreadful. At least it makes shopping easier as I just have to choose between Coles and Aldi.
     
    JacM likes this.
  2. The Falcon

    The Falcon Well-Known Member

    Joined:
    18th Jun, 2015
    Posts:
    3,423
    Location:
    AU
    Yep, everyone agrees with that. So what does that mean about valuation. I'd say at 2241 it was undervalued, its probably around fair value at the moment at 2502. Do you wait until the ship is turned and you have evidential proof of this in 18 months and the stock is trading at 3200cps?

    Can you expand upon "if your buy price proves poor". Say you buy what you term a long term investment at 2500cps. Where do you set your stop? Personally, a change in your thesis on a stock due to its competitive position or valuation grounds may be a sell trigger, but SP fluctuation is not. Look at 52 week high/low for even the largest stocks on the ASX and 20-30% trading range is common. Do you keep adjusting stops each week? (not getting caught out by ex div!).

    Say Austing sets a 10% stop. He buys at 2500 and is stopped out at 2250cps. He is a long term accumulator and income focussed investor. He has now permanently lost 10% of his capital.
    This is a real bummer for Austing as he wants to be a long term holder.

    On the other hand, Austing's mate bought at 2500cps, he suffered a 10% drawdown, but SP is now back at 2502. Austing's mate has lost zero capital.

    Stop losses are traders tools and not suited for long term investment. Growth / Momentum and T/A yes sure. But this is not what Austing is doing.

    On your last point, that's what makes the market I suppose. Let us know the "blue chips that will gain sooner with similar yield". Lets perhaps revisit in 24 months and look at TSR during that period for ***** and giggles. (note, I am not saying you wont be right :))

    Just presenting a different view.
     
    Last edited by a moderator: 30th Dec, 2015
    Observer, Erida, Nodrog and 1 other person like this.
  3. Ouga

    Ouga Well-Known Member

    Joined:
    18th Jun, 2015
    Posts:
    1,100
    Location:
    "Trying is the first step towards failure" Homer
    I was clueless about how to approach shares before I did some research and educated myself. Now, I am still clueless, however I have picked up a couple of principles I find incredibly reassuring, pretty dumb proof and easy to put into practice:

    1. Shares should be approached with an investing point of view. The keyword here being investing, as in long term investing. Prices fluctuate in the short term and there are simply too many factors - for me - to try and predict prices. However, over the long term, especially with dividends taken into consideration, they tend to go up. So, I look at it long term and don't bother with checking the daily (or weekly/monthly) prices. I regularly add to my positions when I am able to and when the price does not look too extreme.

    2. Selecting a specific company is an extremely difficult task - even blue chips - and I simply do not have the knowledge to do it. Furthermore, it has been demonstrated continually beating the index simply does not work - even for the experts! - so I am certainly unable to do that. Actually I have no desire of beating the index, the market return suits me just fine. Therefore, I use index funds for holding my shares and get instant and anwesome diversification.

    Learning about these 2 principles - that follow Buffet's philosophy - I found it relaxing and in fact liberating. They are so easy to implement and have a proven track record, they just look like a no brainer to me! Definitely a lot easier to approach than property.
     
    oracle and Nodrog like this.
  4. datto

    datto Well-Known Member

    Joined:
    23rd Jun, 2015
    Posts:
    6,675
    Location:
    Mt Druuiitt
    WOW is over $25 today . Seems like the market is getting bullish or it could be another "pump 'n dump".

    Stay tuned.
     
  5. Nodrog

    Nodrog Well-Known Member

    Joined:
    28th Jun, 2015
    Posts:
    11,376
    Location:
    Buderim
    Each to their own, whatever works for each individual.

    There was a time in my life when I was fanatical about trading (short and long term) and oh what a mob of mugs those mostly buy and hold investors were. Years spent studying and applying charting, technical trading (futures and stocks, long and short) money and risk management plus trading psychology (eg Van Tharp and others). And as is generally the focus it was mostly about income from "capital" gain and maybe some dividends along the way. Most strategies were trend based although not all with the application of various money and risk management strategies and only needing one to be right a relatively small percentage of the time ... . In the end I'll admit I wasn't overly successful. Yes money can be made if you are using good systems and are prepared to stick with them through thick and thin even if you are having a bad run having been stopped out in the previous dozen or more trades! The novelty wore off over time when I finally realised that true financial freedom for me was all about passive investing. Trading and closely following the market was just another job!

    But I have already rambled on too much. To cut a long story short nowadays I'm one of those boring buy and hold dividend focused investors with most holdings being quality LICs, a couple of index funds along with predominantly larger Industrial stocks. Most buying generally happens during times of gloom but it is those times of absolute despair (eg GFC) when I get really excited and buy aggressively. Otherwise it is generally close to set and forget with the listed funds truely buy and hold and direct industrial shares only sold if they well and truely go off the rails. Life is much too exciting to be worrying about the sharemarket. But I admit I do get excited and do pay attention when the market tanks. But that only happen every few or more years.

    No doubt some will tear my approach to shreds. Might make for entertaining reading which we have the luxury of doing along with anything else we choose day or night having retired very comfortably thanks to income from this boring approach to shares!
     
    oracle, T.C. and The Falcon like this.
  6. The Falcon

    The Falcon Well-Known Member

    Joined:
    18th Jun, 2015
    Posts:
    3,423
    Location:
    AU
    @Ouga good stuff, but value and small are two factors that have outperformed over a very long time period. Find a way to get that exposure cheaply over the long term and you will beat cap weighting.
     
    Ouga likes this.
  7. wogitalia

    wogitalia Well-Known Member

    Joined:
    28th Oct, 2015
    Posts:
    872
    Location:
    Perth
    2 years is still very short term, especially on income producing shares. Simple fact is that Woolworths shares are paying far better returns than money in the bank, even if they lose some capital value in the short term.

    I mean if it's an investment then you should be looking at the 10 year projection on it not worrying about the next 6 months or 2 years. If you bought a house and it hadn't done anything in 2 years would you dump it?
     
  8. datto

    datto Well-Known Member

    Joined:
    23rd Jun, 2015
    Posts:
    6,675
    Location:
    Mt Druuiitt
    Don't forget that shares are dynamic. Buy. Sell, short, long, etc.

    Don't forget you can even wash shares and dividends. Done properly the tax man can't touch you.....not even in 30 years lol.
     
  9. willair

    willair Well-Known Member Premium Member

    Joined:
    19th Jun, 2015
    Posts:
    6,776
    Location:
    ....UKI nth nsw ....
    datto likes this.
  10. Nodrog

    Nodrog Well-Known Member

    Joined:
    28th Jun, 2015
    Posts:
    11,376
    Location:
    Buderim
    Ouga,

    Far from being clueless your post suggests you are a very intelligent investor. LICs (the older ones are somewhat similar to the index) and index funds to a lesser degree are what I'm most comfortable with and make up at least 70% of our share holdings. But I'm afraid greed still runs in my blood. With my preferred LICs so often trading at a premium and the market index unfortunately weighed down by resource rubbish (and LICs to a lesser extent) I'm afraid I can't resist buying direct mostly blue chip "Industrial" shares when they get hammered and their yields are through the roof. Plus as an income investor these direct industrial holdings somewhat balance out the resource junk held by LICs and the index and boost the overall portfolio yield. However buying direct shares as opposed to LICs and the index increases risk.

    If I was younger I would just dollar cost average into older LICs (perhaps consider some mid/small cap exposure as suggested by Falcon) and the index(s) but always keep some powder in the keg for when market corrections/disasters strike. But for us having secured a generous passive income and retired buying now mostly happens during market gloom. My first port of call is always LICs but if they are trading at a significant premium the index is the next port of call. After placing funds with either of these I may be tempted to add to our direct share holdings if they have really been smashed down and the yields are way too tempting to resist. The direct shares are held outside the SMSF (ie in the family trust) and thus have the advantage of being able to take more advantage of leverage. So we maintain a LOC for those times when extraordinary opportunities arise.
     
    Ouga and gman65 like this.
  11. Kangaroo

    Kangaroo Well-Known Member

    Joined:
    21st Aug, 2015
    Posts:
    252
    Location:
    Sydney
    Just an observation of Wow business.

    Wow had the biggest market share from 2000 to 2005. After 2005, it started to go sideways and eventually started to lose market share due to the competition of Coles, Aldi and Costco. Internally, the real customer focus strategy has been replaced with more savings, better looking reports and better presentations. The internal culture has changed from caring for each other into bullying, punishment and other high pressure micro-management measures.

    Here was what the then senior MD's answer to some of questions:

    Q: Before Aldi came to Australia, someone asked a MD that since we already had the logistics of supply/warehousing, why not just copy Aldi since it is a working formula ?
    A: Not to worry. Aldi will never be a threat.

    Q: Before Costco came to Australia, someone asked a MD that since we already had the logistics of supply/warehousing, why not just copy Costco since it is a working formula ?
    A:Not to worry, Costco will have very limited impact

    Q: In the best time of WOW business around 2003, a MD was asked why we did not keep reducing the price to kill Coles once for all ?
    A: Business should not be done that way.

    Q: Around 2006 when Coles was about to turn around, a MD was asked why we spend huge amount of money on a particular IT project which Coles ditched ?
    A: We are smarter.

    The examples were endless.

    By the way, I went to Masters a few days ago and found the following compared with Bunnings:

    1: price looks cheaper
    2: staffs are much more rude.
    3: price labeling messy and misplaced.
    4: shelf layout worse
    5: varieties seem to worse

    End result: I went back to Bunnings.

    The best time of Wow was in late 90's and most of the things done since 2000 were questionable at best. Hopefully the new CEO and his team can turn things around.

    In terms of business, it is still in downward trend in short or medium term considering the pressure from Coles and the likes.

    Sorry for the typo error.
     
  12. Nodrog

    Nodrog Well-Known Member

    Joined:
    28th Jun, 2015
    Posts:
    11,376
    Location:
    Buderim
    I suppose we could go around in circles forever debating whether Wollies is a good or bad stock. Even the fund professionals are no different. However I have noticed that longer term focused, deep value fund managers such as Perpetual, Clime Asset Management and others have been accumulating sizable holdings of WOW more recently!

    A previous poster suggested there are far better yield stocks than WOW on offer. Perhaps so but we already hold heaps of bank stocks including MQG plus numerous others including WES, TLS, SUN, LLC etc. However given my limited stock picking skills exposure to mid and small cap industrials is purely through LICs. In fact WOW is our smallest direct holding. So given our diversified approach and being somewhat more aligned with longer term value investing, of the major Large cap industrial stocks WOW is one of the most beaten down. Hence why we added to it recently. However if it really goes pear shaped and especially if they stop paying a dividend beyond the short term then of course we will get rid of it. And finally given that WOW is only around three to four percent of our "direct" share holdings I can assure you that I don't stay up late at night worrying about others suggesting I'm a dill for holding it:)
     
    Last edited: 31st Dec, 2015
    gman65 likes this.
  13. The Falcon

    The Falcon Well-Known Member

    Joined:
    18th Jun, 2015
    Posts:
    3,423
    Location:
    AU
    add to that Hamish Douglass @ Magellan has added WOW as his only ASX position in the Magellan Global Fund. Magellan's reputation stands by itself...(both as a fund manager and as I wonderful business...go you good thing!) I note that a lot of the comments from Joe Punter are of the short term qualitative variety, which is understandable.

    WOW is a 2.5% position for me and I share your outlook Austing :)
     
  14. wogitalia

    wogitalia Well-Known Member

    Joined:
    28th Oct, 2015
    Posts:
    872
    Location:
    Perth
    I wish I had more money to put into WOW personally. For all the doom and gloom they're still project to make nearly $2b in profit... that's not a bad company to be getting into on a solid discount.
     
  15. cdchi1

    cdchi1 Well-Known Member

    Joined:
    12th Oct, 2015
    Posts:
    87
    Location:
    Elwood
    Market cap approx $32B (bit less after today I guess). Projected Profit of $2B. Assuming that's net of tax (is it?) means a PE of 16. Market (ie retail) sector PE is around 15. Not sure its trading at a discount just yet.

    Note: I haven't done the actual numbers at all, just going on Comsec market cap fig and your profit projection.

    Using Thomson EPS consensus figures of around 141 and SP of $24.4, gives a PE of 17.4 which again is higher than market PE

    Arguably a bluechip retailer should trade at premium to market sector PE, so maybe at fair value.
     
  16. Kangaroo

    Kangaroo Well-Known Member

    Joined:
    21st Aug, 2015
    Posts:
    252
    Location:
    Sydney

    Wow and big W used to have everyday low price policy(EDLP) to beat the then more arrogant opponents. After winning some battles, Wow stopped this policy and started to adopt the more opportunistic Specials/Offers/Rewards/Points policy.
     
  17. johnpendlebury

    johnpendlebury Well-Known Member

    Joined:
    18th Dec, 2015
    Posts:
    176
    Location:
    nowhere
    yeh but you aren't buying the company based on what they're earning today, you are investing in them for their future earnings/growth.

    WOW is a pass for mine
     
    shelleykins likes this.
  18. Tattler

    Tattler Well-Known Member

    Joined:
    18th Jun, 2015
    Posts:
    1,065
    Location:
    Sydney
    The issue with WOW is that it would take a lot of guts and work (e.g. kill off Masters) to turn the boat around. It could be years before you can see it back up again.

    In the mean time, people can focus on all the other stocks in ASX and make money on it, and then still have plenty of time to go back to WOW.
     
  19. gman65

    gman65 Well-Known Member

    Joined:
    23rd Jun, 2015
    Posts:
    1,802
    Location:
    Brisbane
    Wow so to speak, looks like I stirred some comments here.

    I would probably not just buy a stock "because it has dropped a lot, therefore it must go up", as from experience, there often (not always) a good reason for it and that has cost me in the past. If the stock keeps falling significantly then obviously it may not have proved the best time to buy.

    Some of these reasons become known, or some of them become more public later on after the share price has been on a steady down-trend... or the business has continued to not turn things around, whichever way you see it. So therefore I'd wait until some sign that the stock has bottomed, either fundamentally, technically or in sentiment before buying-in. I still think even if you are *not* even using T/A, even some basic entry price is important.

    Stops don't have to be a hard and fast %, but its more an exit strategy. "If things aren't what I expected when I bought, when do I admit I made a mistake, and how much am I really prepared to lose or willing to wait time on?". If it keeps you awake at night, then a simple protection mechanism can help. Questions I like to ask myself are:

    1. Why did I buy in the first place
    2. Does this still hold true
    3. Is the market telling me otherwise, over and over
    4. Is it likely this will reverse any time soon
    5. What else may be returning a better investment

    However yes, taking a 5-10% here and there in the short-term would quickly mean you would destroy your investment base. So you do need to be careful.

    All too many times, yield seems to be an excuse for a poor investment (whether its shares or elsewhere) "oh but I'm getting 5% per year". Yes, but in the next 4 years if you lose 20% of your capital, and you need the money back in a certain timeframe your hands can be severely tied.

    I'm not sure the OP really indicated anything in terms of his expectation, or time-frame on these. It seemed he was a little regretful there.

    For me, I know immediately buying a stock and watching it fall for another 12 months is demoralising. I have done that many times in the past. Now having some sort of worst-case exit strategy, and some other basic plans - is working out much better for me at least.

    Not sure I would apply the same sort of thinking as I would for housing as shares as quite different classes, but it depends on the time-frame as to how long I was prepared to have an under-performing investment. Given an opportunity lost is also a cost.

    One of the key advantages of shares is the liquidity. Within as little as a few days you can have your money back in your account for whatever purpose you may need. But if your shares are underwater, waiting 2-3+ years for it to return (or watch it get snuffed out completely), or taking a big loss, can be very frustrating, again speaking from experience here.

    But yes, it all does depend on your expectations and timeframes. If it is to mainly return

    That would pretty much be my point of view too.. But I do agree everybody does have different strategies, timeframes and reasons for investing.

    Anyhow, I am just speaking for me here, and also having made many mistakes (and some successes) in shares over the years. Some things I have learned the hard way.
     
    Last edited: 1st Jan, 2016
  20. The Falcon

    The Falcon Well-Known Member

    Joined:
    18th Jun, 2015
    Posts:
    3,423
    Location:
    AU
    All good Gman, we are coming that this from fundamentally (pardon the pun) different angles.

    What is your annual average portfolio turnover % and number of positions?