Why I Think Wm. Morrison Supermarkets plc Is A Screaming Buy

The Motley Fool

Morrisons (LSE: MRW) (NASDAQOTH: MRWSY.US) is a stock that I'm thinking of buying more shares in.

A key reason for this is that I feel it is unduly cheap at the moment. For instance, it currently trades on a price-to-earnings (P/E) ratio of just 11.3. This is a significant discount to the wider FTSE 100 and to the food and drug retailer sector in which Morrisons sits.

They trade on P/Es of 15 and 13.6 respectively and, to be blunt, I'm scratching my head as to why this is the case.

Indeed, Morrisons has vast potential and I believe that, by buying now, I would be getting ahead of the curve.

For instance, Morrisons is currently in the midst of opening around 100 convenience stores which will change its regional exposure. Previously, Morrisons has had a bias towards the north of England, mainly as a result of it being Yorkshire 'born and bred'. However, the company has realised that disposable incomes tend to (on average) be higher in the south of England, so is targeting more convenience stores in that part of the country.

This regional shift may not sound like a dramatic change in company strategy but it could have a big impact in future years, as Morrisons could be viewed by investors as a food retailer with more diverse (and, therefore, less risky) operations. A push in the south may also increase margins and profits, too.

Furthermore, Morrisons remains a great stock to hold while bank savings rates are at historic lows and inflation remains an ever-present problem. Shares currently yield 4.6%, which is considerably higher than both the FTSE 100 yield of 3.4% and the food retai sector yield of 3.9%. It is also higher than the current rate of inflation, which is always positive for Foolish portfolios.

So, I'm thinking of adding more Morrisons to my portfolio because I think it offers great value for money (for investors, as well as customers), should benefit from a more diverse regional exposure in future years as well as having an impressive yield, which is very useful for income-seeking investors like me.

However, the team at The Motley Fool has found a company that we think is even more attractive than Morrison's for income-seeking investors and has labelled it The Top Income Share Of 2013.

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