Very interesting article! Never thought of factoring in the value of a grocery stores with their real estate property value and how much that affects the value of the grocery store.
Excellent write up. I did own some share eons ago, but I will have to take a look at this one again based on what you have written. Don’t let the people who are raining on your parade about the real estate deter you. While Cap Ex be a problem maintenance wise by owning the properties if inflation increases, but hard assets and land will still win the day. And people always need groceries.
I have done well with VLGEA in the past. I don’t own it currently, but I have others food stores that merged. Delchamps comes to mind, and also Food Lion. They go back a ways.
I don’t mind an owner that has a lot of skin in the game. And one comment from a butcher, who very well could have been disgruntled that day, is not analysis.
You may want to check to see if Mario Gabelli owns this. I do recall him writing about the stock in the past. Perhaps you can find his comments.
I hope all this made sense. I am busy with a lot of mundane problems right now, but I’ll will check out the reports and the numbers too.
Thank you so much for your comment Margin of Safety! Gabelli does own it and an analyst of his has made some comments like it's well run but the situation probably wont change much. The encouragement really does mean a lot. I do think Ingles is not going to be a great investment unless the land value is realized, and there is no way to know if or when that will happen, but with that being said I really do appreciate your comment because I made a point to emphasize the caveat and uncertainty of the situation, but many commenters did seem to ignore that and acted like I'm the CEO of Ingles. Thank you margin of safety
Good luck trying to realize the value. They continue to buy real estate while having many vacant buildings sitting as homeless encampments. Not long ago I was in One of their busier stores in an affluent area. The roof had been leaking over the meat for weeks and I talked to the butcher about it. Without prompting him He said they don’t care about selling groceries and only care about buying real estate.
Family controlled, negligible dividend, yes trades at a discount to value of the real estate - but a) will you ever live long enough to see it and b) what's the catalyst? There was an amazing report done on Ingles by Gwen H in great detail.
I agree with both your concerns as being beyond valid! I have read her full report! After stumbling upon the hidden value about two years ago I did some research but ultimately did not really think about it again until a couple months ago, and in that time I read the full report and I thought it was good too!
There’s a lot of land sitting idle too for strategic purposes. I agree that it’s certainly cheap on an asset value but on an earnings basis probably fair but the tiny dividend is the deal breaker. We might be back in 5 years and it’s still 60-80/share. It’s a very interesting and intriguing story though. Appreciate your write up
Hi Peter, nice work and an interesting read. Due to the climate, thát might be a risk indeed. When it comes to investing, I was thinking the same before you wrote it: will this value ever realize…looks like it’s not in their own interest unless they don’t have a successor..? Do you own shares yourself, and for what ‘purpose’ if I may ask? Cheers!
Thank you for the compliment Wouter. Even though there is no catalyst to realize the value, I do own a small amount of shares. I think it would just be a little silly for me to have put in so much work and come to the conclusion of how undervalued this business is, and to not invest in something selling for way less than it's worth. I'm not doing it just because I did so much research, because that would be letting the sunk cost of time dictate if the decision is good or not, but I think a small position in Ingles is a good allocation for me because regardless of what the market does for X number of years, I'm truly thinking as a business owner and getting something for way less than it's worth.
I understand your way of thinking - however, if the stocks keep this ‘discount’ your money won’t actually grow too..so investing in something else that does go up in value (even if it’s not worth it) could be considered a better allocation..
Interesting case study, and congrats on finding this hidden gem. It takes a ton of work and patience. Thank you for sharing your labor of love to the masses. The amount of work involved should not be taken for granted!! I think one fear I would have is if the flooding caused significant disruption then it could do the same in the future. Hopefully it won't ever flood like that again but the weather patterns here in KY have shifted in a way that has bigger storms reappearing more often than they ever have. Anyhow lots to consider on a case like this. If the housing markets gets hit hard commercial property could take a hit as well, but long term I doubt that would matter.
Thank you Wayfairer I really appreciate this comment! I think I probably lean more towards the flooding not changing the thesis but I do see the concern!
Great article! However, I would add some more number metrics, such as a dcf valuation or a breakdown of their revenues, and how much of their cash flow they are putting to capEx.
For a Canadian grocery chain, Metro (MRU) also has ownership of most of its real estate.
Very interesting article! Never thought of factoring in the value of a grocery stores with their real estate property value and how much that affects the value of the grocery store.
Excellent write up. I did own some share eons ago, but I will have to take a look at this one again based on what you have written. Don’t let the people who are raining on your parade about the real estate deter you. While Cap Ex be a problem maintenance wise by owning the properties if inflation increases, but hard assets and land will still win the day. And people always need groceries.
I have done well with VLGEA in the past. I don’t own it currently, but I have others food stores that merged. Delchamps comes to mind, and also Food Lion. They go back a ways.
I don’t mind an owner that has a lot of skin in the game. And one comment from a butcher, who very well could have been disgruntled that day, is not analysis.
You may want to check to see if Mario Gabelli owns this. I do recall him writing about the stock in the past. Perhaps you can find his comments.
I hope all this made sense. I am busy with a lot of mundane problems right now, but I’ll will check out the reports and the numbers too.
Thanks. All the best.
Thank you so much for your comment Margin of Safety! Gabelli does own it and an analyst of his has made some comments like it's well run but the situation probably wont change much. The encouragement really does mean a lot. I do think Ingles is not going to be a great investment unless the land value is realized, and there is no way to know if or when that will happen, but with that being said I really do appreciate your comment because I made a point to emphasize the caveat and uncertainty of the situation, but many commenters did seem to ignore that and acted like I'm the CEO of Ingles. Thank you margin of safety
Good luck trying to realize the value. They continue to buy real estate while having many vacant buildings sitting as homeless encampments. Not long ago I was in One of their busier stores in an affluent area. The roof had been leaking over the meat for weeks and I talked to the butcher about it. Without prompting him He said they don’t care about selling groceries and only care about buying real estate.
The roof meat sounds tasty
Family controlled, negligible dividend, yes trades at a discount to value of the real estate - but a) will you ever live long enough to see it and b) what's the catalyst? There was an amazing report done on Ingles by Gwen H in great detail.
I agree with both your concerns as being beyond valid! I have read her full report! After stumbling upon the hidden value about two years ago I did some research but ultimately did not really think about it again until a couple months ago, and in that time I read the full report and I thought it was good too!
There’s a lot of land sitting idle too for strategic purposes. I agree that it’s certainly cheap on an asset value but on an earnings basis probably fair but the tiny dividend is the deal breaker. We might be back in 5 years and it’s still 60-80/share. It’s a very interesting and intriguing story though. Appreciate your write up
Hi Peter, nice work and an interesting read. Due to the climate, thát might be a risk indeed. When it comes to investing, I was thinking the same before you wrote it: will this value ever realize…looks like it’s not in their own interest unless they don’t have a successor..? Do you own shares yourself, and for what ‘purpose’ if I may ask? Cheers!
Thank you for the compliment Wouter. Even though there is no catalyst to realize the value, I do own a small amount of shares. I think it would just be a little silly for me to have put in so much work and come to the conclusion of how undervalued this business is, and to not invest in something selling for way less than it's worth. I'm not doing it just because I did so much research, because that would be letting the sunk cost of time dictate if the decision is good or not, but I think a small position in Ingles is a good allocation for me because regardless of what the market does for X number of years, I'm truly thinking as a business owner and getting something for way less than it's worth.
I understand your way of thinking - however, if the stocks keep this ‘discount’ your money won’t actually grow too..so investing in something else that does go up in value (even if it’s not worth it) could be considered a better allocation..
Interesting case study, and congrats on finding this hidden gem. It takes a ton of work and patience. Thank you for sharing your labor of love to the masses. The amount of work involved should not be taken for granted!! I think one fear I would have is if the flooding caused significant disruption then it could do the same in the future. Hopefully it won't ever flood like that again but the weather patterns here in KY have shifted in a way that has bigger storms reappearing more often than they ever have. Anyhow lots to consider on a case like this. If the housing markets gets hit hard commercial property could take a hit as well, but long term I doubt that would matter.
Thank you Wayfairer I really appreciate this comment! I think I probably lean more towards the flooding not changing the thesis but I do see the concern!
Great article! However, I would add some more number metrics, such as a dcf valuation or a breakdown of their revenues, and how much of their cash flow they are putting to capEx.
Thank you for your comment Antoni! I can definitely see your points about wanting that info!