From the Dealing Desk – The Retail Sector
Sidney Launspach
ALSI Mentor & Portfolio ManagerSidney is a professional derivatives trader and portfolio manager with a background in economics, having completed his degree in BCom Economics in 2006. He has experienced both prosperous and challenging times in the markets over the past 11 years, which has shaped his trading strategy to generate maximum revenue during uncertain times. He believes that being innovative and adaptable is key to success in the world of trading.
The retail sector is always an interesting sector to analyse. Reason for this is that it is a proxy for the health of the consumer. I have taken two shares to illustrate how investors have bought the defensive retailers and avoided or sold the more cyclical retailers.
Shoprite has maintained its uptrend while Woolies has not been so lucky. Woolies has come under pressure from a weak consumer that led to earnings disappointments and a lower share price.
The chart below shows the share price of Woolies. This counter is still in a down trend so I would suggest adopting a wait-and-see approach. When the chart becomes more constructive and makes higher lows it will be the time to buy.
The share looks cheap if you consider the historic PE is 13.54 and the one year forward PE is 12.82. The shares is also currently on a dividend yield of 5.5%. If you consider the PE of Shoprite it is currently 17.81 one year forward.
Next time
We take a look at food producers and what shares to look at in that growing sector.
Sidney Launspach
ALSI Mentor & Portfolio ManagerSidney is a professional derivatives trader and portfolio manager with a background in economics, having completed his degree in BCom Economics in 2006. He has experienced both prosperous and challenging times in the markets over the past 11 years, which has shaped his trading strategy to generate maximum revenue during uncertain times. He believes that being innovative and adaptable is key to success in the world of trading.
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