Sainsbury's underlying value isn't adequately reflected in its share price.
During bull markets, investors sometimes deride the stalwarts. And one of the most derided stocks around has to be J Sainsbury (LSE: SBRY). The shares have done next to nothing for two decades.
This broadly matches the performance of the shops that have trundled along, but have been left in the wake of their faster-growing rivals, whose share prices have also reacted accordingly.
But when investing times are hard, the dogged performance and balance sheet strength of Sainsbury is like a soothing balm.
It was for this reason that the boring old supermarket chain became my second largest holding back in the depths of despair of early October last year, around 280p.
As I pointed out with the interim results, Sainsbury is tantamount to being valued as a property investor that happens to sell groceries and other stuff from the property it owns. So any money it makes in that process is almost a bonus.
And making money it most certainly has been -- better than its main rivals, it would seem. Wednesday's trading statement speaks of a "record-breaking" Christmas. Like-for-like sales, ignoring petrol and new-store sales, were up by 2.1% in the 14 weeks to 8 January from a year earlier. Non-food and local store sales have done particularly well. Sainsbury even managed to gain some Christmas market share from its rivals, and online sales are growing rapidly.
What the company didn't say was whether we can expect any change in earnings. As a result, the share price is almost unchanged at 305p, just a smidgeon north of its NTAV per share of around 300p.
The conventional market wisdom seems to be that Sainsbury has insufficient brand equity in a market where consumers can shift choice so easily. So it gets gradually squeezed out. This is why the shares are priced around their NTAV.
For me, the trading statement helps demonstrate that this is wrong. And the company remains something of a sitting duck.
I think Sainsbury will grow. I don't welcome with open arms a shopping future where megastore chains supply everything we need in life (online or in person), while metaphorical tumbleweeds roll down the high street. But that doesn't mean it can't happen. We vote with our feet.
Patience is clearly required here. I just hope it doesn't take another 20 years. But the yield in the meantime of over 5% will help keep me in groceries.
> Our latest free report has just been released. Make sure you don't miss '10 Steps to Making a Million'
More from David Holding:
> David owns shares in Sainsbury.