TORONTO – Canadian investors looking for bargains should check out their local grocery stores, whose stocks are trading at an attractive discount due to a looming expansion in Canada by Wal-Mart Stores Inc and Target Corp.
Industry watchers and fund managers say Loblaw Cos Ltd , Metro Inc and Empire Co Ltd – the three biggest publicly traded grocery chains – are undervalued, despite an expected loss of market share to the two big U.S.-based discounters.
Analysts have cut their price targets on the stocks, but still expect them to deliver solid gains on earnings. They note the Canadian retailers still boast popular brands, enviable locations and other advantages.
"The risks of growing square footage by Wal-Mart and … Target offering more food items is a concern," said Barry Schwartz, portfolio manager at Baskin Financial Services. "However, I think it's been priced in the valuations of some of these companies, and I think some of those fears are overblown."
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