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Tuesday, January 11, 2011

Supervalu: Certainly not

So, Supervalu (SVU) had a huge plunge today on a weak earnings report and weak earnings outlook. Frankly, the grocery store sector is a terrible business to begin with and one that should always be stayed away from on a routine basis.

Now, a brief caveat here is that on forward-looking earnings the stock trades at something around 6x earnings, which is cheap even if they had total stagnation ahead of them. However, I think it might be worse than that. The stock has a sickly chart that indicates strong market suspicion of worse things to come. So far, SVU continues to prove the pessimists right.

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