Over the past 12 months, the J Sainsbury‘s (LSE: SBRY) share price has been a pretty poor investment. Even after including dividends, the stock has produced a negative return of -34.3% over the past year, underperforming the FTSE 100 by around 39%.
Unfortunately, the company’s performance over the past five and 10 years hasn’t been any better. The stock has underperformed the FTSE 100 by around 10% per annum over the past five years and 9% over the past decade, even after including dividends.
In fact, with a performance of just 0.8% per annum for the past 10 years, investors would have been better off putting their money in a cash savings account rather than buying the Sainsbury’s share price. And I don’t think the company’s performance is going to improve anytime soon as analysts reckon the firm’s earnings per share will slump 15% this year as consumers turn their backs on the business.
With this being the case, I would dump the Sainsbury’s share price today and use the money to buy Morrisons (LSE: MRW) instead.
The best of the best
Meanwhile, the best performing retailer in the FTSE 100 over the past 12 months is Ocado (LSE: OCDO). Shares in this pioneering company have risen 17.3% and, last year, the stock was also the best performer in the whole FTSE 100.
Shares in Ocado have surged as the business has inked several transformative agreements with third parties for its fulfilment technology, which will allow retailers to improve the efficiency of their online operations significantly, according to the company.
The most important of these deals is the £750m tie-up with Marks & Spencer, announced at the beginning of this year. Ocado will help M&S to develop an online delivery service with its highly sought-after technology.
It’s clear that Ocado has something other retailers want. But the problem is the company is not expected to generate a profit from its operations for some time.
Analysts believe it will lose around £100m during the next two years on sales of around £4bn. With this being the case, even though I think the enterprise does have a bright future, I can’t bring myself to recommend a business that’s losing so much money.
Instead, I think it might be worth investing in Morrisons. You see, the supermarket giant already has an agreement with Ocado under a partnership which dates back to 2013. But the company also has distribution agreements with online giant Amazon.com. To top it off, Morrisons is profitable.
In my opinion, this gives investors the best of both worlds. Not only does the company have an agreement with the largest online retailer in the Western world, but it also has access to Ocado’s technology — technology M&S has just paid nearly £1bn to work with.
An attractive price
At the time of writing, shares in Morrisons also look appropriately priced. City analysts believe the company will earn around 13.9p per share in 2019, up around 25% year-on-year, on a net income of £332m.
On this basis, the stock is trading at a forward P/E of 14.8. Analysts have also pencilled in a per-share dividend payout of 9.6p, giving a dividend yield of 4.6% at current prices. The company has a history of returning any excess profit to investors via dividends, so I expect this distribution to grow steadily in the years ahead.
That’s why I’d dump the Sainsbury’s share price and buy FTSE 100 growth stock Morrisons instead.
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Rupert Hargreaves owns no share mentioned. John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. The Motley Fool UK owns shares of and has recommended Amazon. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.