J Sainsbury plc’s Products Convince Me It’s A Winner

I’ve started shopping at J Sainsbury plc (LON: SBRY) and I’m now thinking of buying more shares in it.

Peter Stephens

Having held various senior management positions in the manufacturing sector, Peter founded his own manufacturing company in 1996. This was subsequently sold in 2007. Meanwhile, his passion for investing (which began during the privatisations of the 1980s) remains strong and he couples this with writing for The Motley Fool as a Contractor. His investment style is value-oriented; focusing on company fundamentals, as well as assessing the strength and presence of a competitive advantage. While above-average growth prospects remain very attractive, a greater focus on dividends has crept in since Peter became a part-time retiree in 2007.

Published 24 October, 2013 10:38 am BST

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The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

Sainsbury’s (LSE: SBRY) (NASDAQOTH: JSAIY.US) is not the supermarket I normally use, but I ventured there to get a feel for how its products stack up against rivals. Now I’m more convinced than ever that it’s worth adding to my stake in the company.

The main reason for this is simply that Sainsbury’s offers, in my view, the best mixture of quality and cheapness. In other words, it is the best value supermarket.

While its peers seemed to have either focused on price (Tesco) or quality of produce (Morrisons), Sainsbury’s seems to be the only one that has given attention to both and succeeded in creating the best mix of the two.

Of course, I fully appreciate that there is a big difference between being a satisfied customer and a satisfied investor. However, I believe that Sainsbury’s is best placed among its listed peers for the all-important Christmas run-in.

The reason for this is stability. Sainsbury’s already has its ‘live well for less’ campaign etched into British psyche, with the company delivering many years of continued like-for-like sales growth on the back of this.

Therefore, it is under least pressure to come up with something new or original just for Christmas. In other words, customers who want a good value Christmas have known for some time that Sainsbury’s offers just that and so I believe that Sainsbury’s will have a strong Christmas trading period simply because its message has been clear, well-delivered and bought into.

In turn, a strong Christmas period should lead to improved sentiment, meaning investors as well as customers of Sainsbury’s have a happy Christmas. Buying now could mean that investors are ahead of the curve.

Furthermore, Sainsbury’s shares continue to offer good value. For instance, they currently trade on a price-to-book (P/B) ratio of just 1.3. This means that investors are paying for the net assets of the company plus just a relatively small amount of goodwill, especially when you consider that the company’s property portfolio may be worth more than the £9.8 billion it is currently being carried at on the balance sheet.

So, I’m impressed by the quality of Sainsbury’s products in terms of them offering great value for money, as well as it being well positioned ahead of the key Christmas trading period and shares appearing to offer good value for money.