Visit our COVID-19 site for latest information regarding how we can support you. For up to date information about the pandemic visit www.sacoronavirus.co.za.

bs-regular
bs-extra-light
bs-light
bs-light
bs-cond-light-webfont
bs-medium
bs-bold
bs-black

Community


Share knowledge. Ask questions. Find answers.

Online Share Trading

Engage and learn about markets and trading online

Retailers

Reply
J12
Frequent Contributor
Is it just me or does the performance of big retailers seem almost too good to be true? I know some of them haven't performed, but if you look at Mr price, woolies, AVI etc... the price trends look almost exponential. Could this be a credit fuelled bubble that is destined to pop?
0 Kudos
8 REPLIES 8
SimonPB
Valued Contributor
everything is destined to pop .. question is when ??
0 Kudos
kwagga
Super Contributor
Just wait for the first up tic in Reserwe bank borrowing rates and see how this takes the hot air out of these shares.
0 Kudos
Rams
Super Contributor
Mr Price is cash...but maybe credit card buying?. Woolies, well the food is still good but all the other stuff is made in CHINA. Also, Woolies, reward programs and discount programs seem to be working well and i think(not sure) the financial markets business is now with ABSA.
0 Kudos
J12
Frequent Contributor
Yes. Woolies credit card business is now with ABSA and I'm also including bank credit cards when I say "credit fuelled bubble". But more to the point, looking at the PE's of these retailers, its way up in the range of 16 - 24. This is fantastically high and is probably based on the assumption that the retailers can keep up their high growth rates. Perhaps it's not exactly a fair comparison, but a company like BIL is sitting with a PE at around 7 and it's just not making sense to me. Personally, I'm not invested in BIL at the moment because I have other investments that I think are better (for my relatively small fund), but for big funds and other collective investment vehicles, I think they should start moving out of the retailers and into more defensive stocks (like BIL) before they start to feel the pain. It will fall. I don't know when but it will (when the interest rates rise). Also, I think it's better to sell too early than too late, so, I'm just really confused that the PE comparison can be so drastically different... do the fund managers know the future so well that they can afford to take such big risks (by pushing a company's PE up to 24 on the hope of future earnings growth) or are they just stupid?
0 Kudos
J12
Frequent Contributor
Yes. Woolies credit card business is now with ABSA and I'm also including bank credit cards when I say "credit fuelled bubble". But more to the point, looking at the PE's of these retailers, its way up in the range of 16 - 24. This is fantastically high and is probably based on the assumption that the retailers can keep up their high growth rates. Perhaps it's not exactly a fair comparison, but a company like BIL is sitting with a PE at around 7 and it's just not making sense to me. Personally, I'm not invested in BIL at the moment because I have other investments that I think are better (for my relatively small fund), but for big funds and other collective investment vehicles, I think they should start moving out of the retailers and into more defensive stocks (like BIL) before they start to feel the pain. It will fall. I don't know when but it will (when the interest rates rise). Also, I think it's better to sell too early than too late, so, I'm just really confused that the PE comparison can be so drastically different... do the fund managers know the future so well that they can afford to take such big risks (by pushing a company's PE up to 24 on the hope of future earnings growth) or are they just stupid?
0 Kudos
J12
Frequent Contributor
I had woolies shares. Bought in Jul 2008 when the PE was around 8 and sold in Jan/Feb 2010 when the PE hit 16/17. Made a decent profit, but obviously would have made more if I held on, so in hindsight, I sold too soon and I'm fine with that. What I can't understand also is how the market expects woolies to maintain such a high level of growth when most pundits/economists are expecting an interest rate hike. Can someone tell me what it is that I'm missing so I can understand this?
0 Kudos
J12
Frequent Contributor
Also note, I'm only using Woolies as an example. The same applies to Shoprite, Truworths, Mr price, Pick n Pay and other retailer with high PEs.
0 Kudos
DST
Super Contributor
Cash or credit at the shops? http://goo.gl/pJP4r
0 Kudos