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Buying the best of the best
Valued Contributor

Buying the best of the best

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When investing it is surely true that we want to own the best companies? I know many will try and find some beaten down dogs that eventually get it right and see their share price head higher, but finding the best of the best should be our aim. And these best companies deliver on results and that translates into share price gains.

With this in mind recent results show Shoprite* is head and shoulders the best food retailer in South Africa.

Their operating margin at 5.76% is more than double the 2.3% from Pick n Pay – and this after four years of the new CEO at Pick n Pay. They have a growing market share of 33.2% meaning almost every third item sold at a super market in South Africa is sold by one of their three brands. The rest of Africa is rocking albeit currency moves hurt them, but they have a solid and strong operation in numerous African countries outside South Africa.

In short, they are the best of bread locally and likely even internationally.

As for the share price, it had a lull in recent years after a high in 2012 at over R200, but it is back above R200 again and powering ahead with a return excluding dividend of over 600% in the last ten years. Going further back the stock was around 800c when I first bought some in 2002.

My fair value sits at around R285 and I have been buying for much of the last year and am a very happy shareholder.

Below is the interview with Bruce Whitfield and CEO Pieter Engelbrecht.

 



Simon

* the writer holds shares in Shoprite