Author Topic: Call the bottom on Kroger  (Read 4067 times)

Neo

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Call the bottom on Kroger
« on: June 16, 2017, 08:21:48 AM »
Who wants to guess the bottom for Kroger (KR)? Revised guidance coupled with amazon buying whole foods has really beaten this thing down last 48 hours. I think $19.50. Any other guesses?

Heckler

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Re: Call the bottom on Kroger
« Reply #1 on: June 16, 2017, 09:23:20 AM »
Interesting, but pointless to me.  If KR goes down and Amazon goes up, VTI stays the same.

http://www.marketwatch.com/story/grocery-stocks-tank-as-amazon-effect-strikes-fear-in-investors-2017-06-16?siteid=yhoof2&yptr=yahoo

Fascinating graph in that link.

Travis

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Re: Call the bottom on Kroger
« Reply #2 on: June 16, 2017, 09:55:05 AM »
Quote
The long-term effect of Amazon in this category remains unclear, Schick said, but it will depend on competitors digital-response.

“There’s going to be a lot of dancing in both directions,” he said.

In other words, grab a crossword puzzle rather than popcorn.

Scortius

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Re: Call the bottom on Kroger
« Reply #3 on: June 16, 2017, 10:10:09 AM »
Meh, right now it's at 21.5, down from 30 two days ago. Kroger isn't going anywhere, and they don't necessarily directly compete with the Whole Foods market.  In fact, we have both in the area and use both for different items.  I think their main competition right now is Walmart, which will be interesting to watch, but also a currently known entity.  I doubt it goes below 20, and regardless I wouldn't be surprised to see it be back in the mid 20s within a week.  Maybe an opportunity to stock pick!  Wooooo!

Neo

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Re: Call the bottom on Kroger
« Reply #4 on: June 16, 2017, 10:14:24 AM »
That's what I was thinking. I'm from Cincinnati where Kroger is HQ'd. Actually I'm looking at their headquarters out my window as we speak. So I may have a bias. But I truly don't believe Kroger is going anywhere at all. It's a very solid company and they seem to be keeping up with the tech disruption as well as most others. They have online shopping where you can pull up and they load the groceries in your car for you. Bottom line, I think this is a huge overreaction from the 1-2 punch of earnings + amazon-whole foods news. That merger isn't even approved yet, btw.

I am looking *hard* at Jan. 2018 $25 calls. Trading for 90 cents right now...

Vindicated

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Re: Call the bottom on Kroger
« Reply #5 on: June 16, 2017, 10:18:21 AM »
I had a few shares of GE on Robinhood that I started playing around with for the free referrals.  I just sold the GE and bought Kroger.  I plan to cash Robinhood out at the end of the month anyway, so might as well make a few bucks on Kroger's rebound.

If you want a free Robinhood stock, here is my referral. (I know, I'm shameless)

http://share.robinhood.com/danielg954

zoltani

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Re: Call the bottom on Kroger
« Reply #6 on: June 16, 2017, 11:22:26 AM »
I bought some Kroger today. Thought about averaging down my Target shares, but decided to open a new position in Kroger instead.

Stimpy

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Re: Call the bottom on Kroger
« Reply #7 on: June 16, 2017, 11:50:16 AM »
I would think somewhere around 18.00, but who knows.  Emotions for most people right now are currently "KR is Doomed, SELL!" so.....   

I suspect it will keep going down at least through Monday. (Not into timing trades so don't take my word for it.)  Of course, I'll sit here and watch while most of the blood spills, and decide what I want to do then.  Popcorn anyone?

Full disclosure: Long KR    (And Yes, feeling the pain but overall, meh.  Not a significant part of my cash.)

talltexan

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Re: Call the bottom on Kroger
« Reply #8 on: June 19, 2017, 09:34:58 AM »
I pulled the trigger on KR at $24.50 (I did this late Thursday). I'm in the red because of AMZN, but it's still a nice bargain compared to a month ago.

But losing 10% right after you buy something is emotionally draining. Pass the index funds, please!

Laserjet3051

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Re: Call the bottom on Kroger
« Reply #9 on: June 19, 2017, 10:19:48 AM »
I wiped my hands of buying individual stocks back after the year 2000 crash. But I have to admit, that Kroger is looking very good right about now, at least for a medium to long term hold. Tempted to buy in, but my better judgement prevails.

acroy

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Re: Call the bottom on Kroger
« Reply #10 on: June 19, 2017, 10:31:12 AM »
I bought some at 21.7  (0.2% of the portfolio - play money!)
Looks like a good value.
The food industry is changing. The only way I see them declining is if they don't change and don't get bought out.

MasterStache

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Re: Call the bottom on Kroger
« Reply #11 on: June 19, 2017, 11:46:28 AM »
I live near the largest Kroger in the country. Also the most profitable I believe. They announced 3 years ago an expansion to the store offering restaurants and other services. Kroger is not going anywhere. They have so much room for expansion across the US. I actually stopped going there because it is so ridiculously crowded, the prices are outrageous and because Aldi opened up about 2 miles away.   

mizzourah2006

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Re: Call the bottom on Kroger
« Reply #12 on: June 20, 2017, 11:08:23 AM »
Meh, right now it's at 21.5, down from 30 two days ago. Kroger isn't going anywhere, and they don't necessarily directly compete with the Whole Foods market.  In fact, we have both in the area and use both for different items.  I think their main competition right now is Walmart, which will be interesting to watch, but also a currently known entity.  I doubt it goes below 20, and regardless I wouldn't be surprised to see it be back in the mid 20s within a week.  Maybe an opportunity to stock pick!  Wooooo!

These are my exact thoughts. I just picked up shares today. In an otherwise expensive market, Kroger is suddenly priced at an 11 P/E. I agree that it could very likely be at $26-$28 again in a few weeks. I think some of the drop was justified as they came out and said they were going to revise earnings estimates down, but it was to compete on employee wages and price, not necessarily because they feel people are going to stop coming to shop there.

Not everyone wants premium organic food. The Amazon purchase of WFs isn't suddenly going to make WFs start carrying Pepsi, Doritos, and pop-tarts.

ChpBstrd

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Re: Call the bottom on Kroger
« Reply #13 on: June 23, 2017, 11:39:58 AM »
The market price represents the best estimate of value from hundreds of thousands of market participants. It is a fallacy to think that what went down must bounce up.

However, one thing we CAN be confident about is that volatility will *probably* be lower next month than it was this month. That means the price of KR options (both puts and calls) will likely decline from both time decay and reduced volatility. If I was to speculate on Kroger, I'd place a credit spread by selling puts at strike price X and buying the same number of puts at strike price X-Y.

ABC123

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Re: Call the bottom on Kroger
« Reply #14 on: June 23, 2017, 11:53:21 AM »
I do 99 % of my grocery shopping at Kroger. My local store just finished a big expansion. Added a Starbucks, expanded the deli, etc. I would not do much shopping at WF even if there was one close. I don't see anything close to Kroger disappearing.  I have never bought an individual stock before but this may be the one.  It would make me feel better when I hand over the credit card anyway. Man those kids can eat.

Jrr85

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Re: Call the bottom on Kroger
« Reply #15 on: June 23, 2017, 12:33:08 PM »
Meh, right now it's at 21.5, down from 30 two days ago. Kroger isn't going anywhere, and they don't necessarily directly compete with the Whole Foods market.  In fact, we have both in the area and use both for different items.  I think their main competition right now is Walmart, which will be interesting to watch, but also a currently known entity.  I doubt it goes below 20, and regardless I wouldn't be surprised to see it be back in the mid 20s within a week.  Maybe an opportunity to stock pick!  Wooooo!

Kroger covers a lot of market that Whole Foods doesn't, but Wholefoods still prevents Kroger from taking advantage of a segment of the market where walmart doesn't compete.  Where I've lived, Kroger competes with Walmart on the lower end shoppers and then competes with either Publix or Whole Foods on the higher end (with Publix's market overlapping a little more completely than Whole Foods). 

Based on my experience, Kroger must be run really, really well.  But I don't envy them competing against Whole Foods, Publix, and Walmart, all of whom also appear to be run really, really well on slightly different business models that still compete in Kroger's space. 

And the thing that is so potentially devastating about amazon/whole foods is that if Amazon applies the same disregard for healthy margins to groceries that it applies to its online retail, then Whole Foods is about to get much more attractive to a lot of shoppers like me, who appreciate Whole Foods' quality but not quite enough to pay the costs of making it their primary store (which is basically the exact market segment that Kroger enjoys that is not occupied by Whole Foods and Walmart. 


 

talltexan

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Re: Call the bottom on Kroger
« Reply #16 on: June 23, 2017, 12:52:48 PM »
So you're basically saying that Amazon is buying Whole Foods to make it...less profitable?

zoltani

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Re: Call the bottom on Kroger
« Reply #17 on: June 23, 2017, 01:04:32 PM »
I heard someone theorize that amazon bought whole foods because it is one of the largest grocery chains in the US that is not unionized. Therefore they will not get a lot of struggle if they turn it into an employee free store. Amazon already has a store in seattle with no employees. Interesting theory.

Jrr85

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Re: Call the bottom on Kroger
« Reply #18 on: June 23, 2017, 01:23:35 PM »
So you're basically saying that Amazon is buying Whole Foods to make it...less profitable?

I'm saying that Amazon can if it wants to.  Amazon spent years not really making a profit at all, only actually showing a consistent profit in the last couple of years.  And its retail operations to my knowledge contributed almost none of that profit, essentially breaking even while things like web services provided all the profit.  Even with it's "record profits", it's total margin was around 2.8%, which means it's retail margins were almost certainly much lower than that.  The good news is that there is only so much to be squeezed out of margins.  Even if Amazon cuts Whole Foods historical average of around ~3.5% margins in half to 1.75% margins, I'm not sure that's a game changer (and Whole Foods margins have already come down to under 3%, so if that's not a temporary blip, there's probably not much further to go). 

On the other hand, Amazon may treat it like Zappos and let it more or less continue to be Whole Foods with some minor tinkering from Amazon related to digital/delivery stuff.  Or it may turn it into a $13B lab where they focus more on building out and perfecting services (like delivery) than they do on profits.  Or they may turn it into a $13B loss leader that they use to get access to good real estate in affluent zipcodes to help buildout their business model for delivery of perishable goods. 

I have no clue what Amazon will do (my wild guess would be the first option, but that's not even an educated guess), but I can understand if people who own other grocery store stocks (or even work for other grocery stores) are panicking that it's the second option.