In the April 21, 2011, Successful Investor Email/Telephone Hotline, we’ve updated our buy/sell/hold advice on grocery retailer Metro Inc. (symbol MRU.A on Toronto).
Inside this growth stock’s evolution from an aggressive to a conservative pick
Metro is a good example of a stock that has graduated from Stock Pickers Digest, our newsletter for aggressive investors, to The Successful Investor, which focuses on more conservative selections.
Stock Pickers Digest is where we analyze junior or aggressive growth stocks that are attractive but not yet suitable for The Successful Investor’s more conservative focus. Ideally, many of the growth stocks we recommend as buys in Stock Pickers Digest will one day mature into investments we can recommend in The Successful Investor.
We first added Metro to the growth stocks we analyze in Stock Pickers Digest in June 1998. At the time, it was trading at around $10. In December 2007, when we moved it to The Successful Investor, it was trading at about $32, for a 220% gain.
The Successful Investor has two main goals. First, it explains our three-pronged investing approach, which consists of investing mainly in well-established companies, spreading your investments out across the five main economic sectors, and downplaying stocks that are in the broker/media limelight.
Second, it gives you specific stock recommendations that you can use to implement our investment approach.
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Growth stocks: What made Metro attractive for conservative investing
By December 2007, Metro had clearly reached a point where it deserved a spot in The Successful Investor. With its 2005 purchase of A&P Canada, the company had expanded out of its home market of Quebec, where it operated 385 supermarkets under the Metro, Super C and Marche Richelieu banners.
Adding A&P made Metro the third-largest supermarket operator in the country, behind Loblaw and Sobeys. As well, the A&P purchase pushed up the growth stock’s sales substantially. In fact, since we switched Metro to The Successful Investor, it has risen 30.5% — quite a gain in light of the fact that the market is only up 1.2% since then.
This growth stock’s earnings are rising—but so is the competition
In the latest quarter, Metro’s sales fell 0.4%, to $2.57 billion from $2.58 billion a year earlier. That’s mainly because strong competition forced the company to lower its prices. Even with the lower sales, earnings rose 3.7% in the quarter, to $83.3 million from $80.3 million. Earnings per share rose 8.1%, to $0.80 from $0.74, on fewer shares outstanding.
The company faces rising competition from Wal-Mart, which plans to open more of its large supercenter stores in Quebec. These stores sell groceries as well as general merchandise.
Get our latest advice on Metro absolutely FREE
In the April 21, 2011, Successful Investor Email/Telephone Hotline (which you can get when you try The Successful Investor today), we take an in-depth look at Metro, including a close examination of what the company is doing to deal with rising competition in the grocery business. We’ve concluded our analysis with our clear advice on whether you should buy, hold—or sell—this former aggressive pick.
Best of all, you can get this Hotline, which contains our clear buy/sell/hold advice on Metro, absolutely free when you take a no-risk free trial to The Successful Investor today. Plus you also get one free issue of the newsletter, which has been recognized by the Hulbert Financial Digest as the top-performing investment advisory in Canada over past 5 years. Don’t miss out! Click here to get started right away.
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