A Smart & Final Selection

10/09/2002 12:00 am EST

Focus:

Nancy Zambell

Editor, Wall Street's Best Investments and Wall Street's Best Dividend Stocks

Tracing its roots back to 1871, Smart & Final is the largest non-member grocery warehouse chain in the US.  Nancy Zambell, editor of UnTapped Opportunities, says, “The bad news is that only those of you who live in a handful of states, the Caribbean or Mexico, can easily take advantage of the shopping part. But the good news is that everyone can benefit from owning the company’s stock.”  Here’s her overview.

Smart & Final (SMF NYSE) operates 235 stores in Arizona, California, Florida, Idaho, Nevada, Oregon, and Washington. Since 1967, the company’s annual revenues have grown from $240 million to almost $2 billion. The stores have remained relatively small, averaging 16,500 square feet, but are jam-packed with warehouse-priced, large-sized, or quantity-packed products. Each shop carries more than 10,000 everyday items from deli products, meats, produce, frozen foods, paper goods, and wine. And instead of spending the one to two hours that it takes to meander through a huge Costco or Sam’s Club, a shopper can zoom in and out in 20 minutes. 

And for its restaurant and catering clientele, Smart & Final offers specialized lines of restaurant and cooking equipment and supplies. The firm also delivers food and supplies to more than 7,200 restaurants, hotels, cruise ships, and refreshment stands. This segment has suffered significantly due to the decline in tourism. But the sector brings in $170 billion in annual sales and will emerge as the place to be as the economy strengthens. 

The stock is undervalued. Trading at a p/e of just 11.7, the shares are trading at their 52-week low. And the stock is undiscovered. Just a couple of analysts follow the stock and institutional holdings are just 34%. I recommend buying shares of Smart & Final up to $6.25 a share. Should the shares go higher before you have a chance to buy, I suggest waiting until the price settles back. And keep a sell limit of $4 a share in mind as a stop loss.”

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