Go to the Globe and Mail homepage

Jump to main navigationJump to main content

In this July 2004 file photo, Weston Bakery truck trailers sit idle at a George Weston Ltd. owned facility in Toronto.
In this July 2004 file photo, Weston Bakery truck trailers sit idle at a George Weston Ltd. owned facility in Toronto.

One Good Idea

Beaten down Weston, Loblaw cheap at the moment Add to ...

The Source: Paul Gardner, partner and portfolio manager, Avenue Investment Management Inc.

The Idea: Buy shares of George Weston Ltd.

Given how much stocks and bonds have rallied from their recent lows - 40 per cent to 50 per cent in some cases - good buys are difficult to find, Mr. Gardner says.

"You have to hope the economy comes out of recession because that's what the markets are pricing in."

An ideal investment candidate would be a company with a strong balance sheet, trading at an attractive price that has the ability to grow. "That's where Weston comes in," he says. At just shy of $57 a share and yielding 2.6 per cent, "It's a value trade," he says. Weston shares traded in the $80 range as recently as 2007.

A potential double-digit capital gain in a relatively short time if the economy recovers, price cutting abates and Loblaw and George Weston shares come to be looked on more favourably by the market, Mr. Gardner says. What would a more "normal valuation" for Weston be?

"I don't like to put a number on it, but you could see a 30-per-cent return over the next year and a half."

The Big Risk: Fierce price cutting among grocery retailers squeezes profits more than expected at Loblaw as the economy struggles, leading to a long stretch of disappointing earnings and depressing the share price of both Loblaw and its parent, Weston.

Why Listen to Paul Gardner? Mr. Gardner has more than 20 years' experience in the investment business, much of it on the fixed-income side. Avenue Investment Management is an independent investment counsellor and portfolio manager for individuals with $500,000 or more to invest.

 
  • WN-T
  • L-T
Live Discussion of WN on StockTwits
More Discussion on WN-T
Live Discussion of L on StockTwits
More Discussion on L-T

In the know

Most popular video »

Highlights

More from The Globe and Mail

Most Popular Stories