Dealmaker’s Diary: A Buffett-Style Bargain in the Grocery Aisle

Alpesh Patel|December 5, 2024

In a market obsessed with artificial intelligence and soaring tech valuations, I’ve uncovered a tasty stock that’s been feeding America for over a century.

With $9.6 billion in annual revenue, this is no small operation. Yet it’s trading at just 9.9 times forward earnings – a remarkable discount that suggests the market has completely missed the plot.

Even better? It offers something increasingly rare in today’s market: stability, solid dividends, and a proven business model that’s weathered multiple economic cycles.

While tech stocks hog the spotlight, this overlooked food giant is trading at a mouthwatering 60% discount to its true value.

All the details on this century-old business that could be Wall Street’s tastiest bargain are in my video below.

This the kind of research my clients pay thousands for… but you get it for FREE as a Total Wealth subscriber.

Click on the image below to dive in.

 

TRANSCRIPT

Hello, friends, and welcome to another Dealmaker’s Diary.

I’ve got a grand reveal for you on my Stock of the Week. It is SpartanNash (SPTN).

Now, it’s a Nasdaq company, and, as we know, the Nasdaq has been soaring. So can this stock keep up?

It’s a U.S.-based food solutions provider and grocery retailer. Some of you may already know it. They serve independent grocers and military commissaries.

They’ve been around for a while… over 100 years. But for me, it’s not the narrative. It’s the numbers.

I’m very impressed with its revenue of $9.6 billion. This is no small play. It does both retail and wholesale distribution. That gives it diversification on revenue and what in the old days used to be called “vertical integration.”

Let’s have a look at some of those numbers. By the way, it pays dividends as well.

On my Groth-Value-Income rating, it’s got a 7. That’s my proprietary indicator that looks at the valuation of a company, its share price compared to profitability, revenue growth, dividend yields – those kinds of factors – weighs them all together, and gives me an overall score from 1-10. Anything with a 7 or higher meets my minimum criteria.

Looking at the forecast P/E, you’re paying $9.90 for every forecasted dollar in profits. That’s cheap in absolute terms and also for the sector. So, very attractive.

One metric that doesn’t quite meet the kind of stringent requirements I’d have in my GVI Investor research service is its CROCI.

CROCI – cash reserve on capital invested – is very important. I really want to see this number positive. (See why CROCI is so important here.)

It’s losing cash on the capital that it’s investing at the moment. That means it’s been beaten down, and that’s one of the reasons the valuation is dropping so much.

I think the market is not anticipating anything spectacular… but I’ll tell you in a moment why I think there’s a lot of upside potential.

Volatility is very low, which is always an added bonus. I don’t particularly like bumpy rides in companies.

So what was it that drew my attention to it other than, obviously, my GVI rating? Well, as you can see, the price is at multiyear low supports. You’re looking at a bounce off support.

Now surely, Alpesh, that could mean a false upward breakout and then it falls back again!

Well, what I’m looking at is the MACD – moving average convergence divergence – which is a measure of momentum. And what I am expecting, anticipating, hoping is that we get something of a move up here.

Really what that means is that I’m looking for a replay of what happened from this period. Something of a sharp rise.

The last time that happened, you were looking at going from about 12 – sorry, my hands are a bit wiggly – to almost 24. So you’re almost looking at 100% to the upside when you got that last bit of a bump up, let alone the longer term.

We’re just looking at 12 months here. Now if in the next 12 months, we get even close to recent highs or two-year-old highs, you’re still looking at a good significant upside over the next 12 months.

So you can see how I’ve done the math and the analysis on that.

It’s about 60% undervalued on a discount cash flow basis as well, which is always good to know, good to see. It’s a nice little thing. It’s not essential. Discount cash flow can be rather sensitive, but that would bring the price up to $47, which would place it well above its current price. So to get that kind of return, we don’t need a massive rise up in the stock.

It’s an interesting play. I hope you found that useful, entertaining, informative, and educational.

Thank you all very much. I hope to see you very soon.