Why grocery stores make poor investments…
Investing is all about making the most out of our available capital.
With that in mind, the companies we buy must have the highest possible ROIC if we are to maximize our returns. Again…it”s just common sense.
In the long term, there is no substitute for purely excellent companies with high ROIC. I know from my experience owning Coach, a company that averages 42% ROIC.
That said, let’s take a look at average ROIC from some top grocery names:
1) Whole Foods: 8%
2) Kroger: 8%
3) Supervalu: -2.3%
4) Costco: 10%
As you can plainly see, grocery chains are just not very good companies. They are simply not worth owning over the long term. There are far, far better companies out there.
Peace. JBFull disclosure: This blog and website are for informational, educational, and discussion purposes only. I am not a registered advisor, broker, dealer, or otherwise holding myself out to be a financial expert. In writing this Blog, I am only stating my opinion, which may change over time, as does the market and the conditions which affect it. I do not intend to cause harm of any kind by writing this Blog and do not guarantee the absolute accuracy of the contents within it. By writing this Blog, I do not offer advice of any kind as it relates to a potential course of action by readers involving the sale or purchase of stocks or any other security. I encourage you to consult with your financial advisor or other experts before making such decisions. Therefore, you, the reader, hereby agree not to hold JB’s Financial Blog, or any of its writers, liable for any action which you may choose to take or fail to take based strictly upon information contained within this Blog. I am in no way responsible for the comments which other readers may make, nor the content of websites found via outbound or inbound links to this site, as I have no control over the contents thereof. I look forward to your input and feedback. Peace. JB © 2010, JB’s Financial Blog. All rights reserved. Unauthorized use of JB’s Financial Blog’s material may violate multiple legal rights of JB’s Financial Blog. All of JB’s Financial Blog’s material and information provided herein is fully protected under the United States Copyright Laws, 17 U.S.C. §§ 101 et seq., and unauthorized copying of, or quoting from, our materials without express written permission is strictly prohibited. JB