Sunday, June 22, 2008

One More Screaming Buy with a Hidden Gem

A couple days ago, I wrote about several stocks which I called 'Screaming Buys with Hidden Gems', which are stocks that have a a division, business, or product which may be overlooked. Here is one more that I didn't include that is worth further research.

Safeway Inc. (SWY) is the third largest supermarket chain in North America and the the tenth-largest retailer in the United States, with over 1750 stores. Last month, the company increased its dividend and raised the stock repurchase program by $1 billion to a total of $5 billion.

The company's hidden gem is Blackhawk Network Holdings, the subsidiary that provides third-party gift cards, prepaid cards, telecom cards and entertainment cards, in their own stores and to other retailers. If you have ever walked into a Safeway, you would see kiosks of gift cards at every checkout stand. However, if you go to one of their competitors, you would would be lucky (no pun intended) to find any gift cards. This is a huge business, and brings in a substantial amount of revenues near the end of calendar years.

With Safeway being in a recession resistant business, and with shoppers switching from name brands to Safeway generic brands which can provide higher profit margins, it makes Safeway an interesting story. The stock has a PE of 15, a PEG of 1.21, and a yield of 1.1%.

Check out the list of all the Screaming Buys with Hidden Gems.

Author does not own any of the above.

By Fred Fuld at

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