The Daily Kill Sheet Picking Off Profits One Stock At A Time!

February 21, 2013

Daily Kill Sheet For February 21, 2013

Filed under: Uncategorized — Administrator @ 11:57 am

Position Update – Safeway Inc. (SWY $23.71)

Safeway reported adjusted fourth-quarter earnings this morning of $0.94 a share, $0.19 better than the consensus estimate. Same-store sales increased 0.8%and marked the third consecutive quarter where the company gained U.S. market share.

We’ve held the stock for about nine months now, and for most of that time the stock has been a laggard. While we are showing a 17.30% overall gain in the position, the market has outpaced us over most of that time period. Even so, I’ve hesitated to sell the shares given that results have beaten my expectations in each of the past three quarters while the stock’s valuation has remained near the lower end of its traditional range. Much of today’s surge came after management noted that its comps were running up about 2% quarter to date, which implies their fastest run rate since 2008.

After today’s surge I am goin to take the money and run, however. Most of our gain in the stock has happened today, and after a big one-day run up stocks have a tendency to take a breather. Thus, we’ll use today’s strength to take profits in this slow-moving value play. While it is encouraging that comps are accelerating, gross margins were down this quarter and an aggressive price strategy will likely put pressure on the gross margin going forward. With that said, I suspect that a lot of today’s strength is short covering, and we are going to take advantage of it here   and take profits of 17.3%.

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