Throughout my time as a private investor, I have always been aware of a clear boundary between customers and investors. Indeed, I have always done my utmost to wear each ‘hat’ separately and to avoid investing in companies whose products I like and, similarly, avoid buying the products of companies with whom I have enjoyed investment success.
Hand on heart, I’ve usually managed it but admit to having the odd lapse every now and then (I’m sure my fellow Fools can empathise with me). However, bearing this odd lapse in mind, I recently re-examined my view on Wm. Morrison Supermarkets (LSE: MRW) after visiting a store for the first time in many, many years. Suffice to say, it was a very different experience than I expected.
Above all else, the things that struck me as I walked around the aisles were the variety, freshness and quality of the groceries. I had expected bargain-basement goods; lots of heavy discounting and foods with questionable ingredients. However, I was genuinely impressed and, upon eating the items once at home, was even more so.
Of course, Morrisons seems to be a little behind the curve in terms of offering no loyalty card and, although I do not buy groceries online, it will not offer such a service until 2014. For me, though, seeing the freshness on Market Street and appreciating the helpfulness of the staff means I wouldn’t want to shop online, and the 1% discount from having a loyalty card makes little difference anyway.
So, having been impressed as a customer, I’m now well aware that I must be highly critical as an investor. To blur the two really wouldn’t be of much use.
As a fan of a good yield, Morrisons remains highly attractive. It yields 4.2%, with the dividend being very well covered and having scope for increase. Furthermore, shares trade on a price-to-earnings (P/E) ratio of just 10.7, which compares favourably to the FTSE 100 on 13.8 and the company’s sector (food and drug retailers), which trades on a P/E of 10.9.
What really attracts me, though, is the defensive nature of the business. Morrisons sells a staple good and, being on a fairly low P/E, it should perform well were the FTSE 100 to fall from its glorious height of 6,500.
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> Peter owns shares in Morrisons.
