An article by Richard Beddard on MCB (McBride) (http://is.gd/SNm56o) prompted me to share my thoughts on FIF (Finsbury Food) and MRW (Morrisons).
It will be decision time for me with regards how I intend to change the Magic Hat portfolio over the weekend.
Richard sums the problems with respect to supermarkets and their suppliers in a nutshell: “Morrisons’ highly publicised strategy to cut prices may force other retailers to follow resulting in a much feared price war and pressure on suppliers to share the cost.”
I’m pretty sure he’s right. It’s one reason why MRW is in the firing line to be jettisoned from my Magic Hat portfolio. It was not a Magic Formula stock to begin with, or at any time throughout, so I have only myself to blame to including it. MJW (Majestic Wine) is also in the firing line to get the can. We shall see which one survives.
I had written about FIF on 5 February (http://is.gd/NUh1m5). The shares have an EY (Earnings Yield) of 15%, which is very good value. The market reaction to their results were poor at the time, and I was very much afraid of walking into a value trap. So far, my reasoning has proved incorrect, and the shares have moved from 47.1p to 58p, a very healthy gain of 23%.
I doubt that I’ll choose to buy into FIF, as I perceive the call to be too tricky for me. My perceptions about the share price movement has been wrong so far, so they could be well be wrong about the future, too. We shall see.
Happy investing to you all.