Safeway, Inc. is engaged in the opertion of retail supermarkets, with over 1,659 stores (as of 12/99) located throughout North America. For the 36 weeks ended 9/9/00, sales rose 16% to $21.96B. Net income rose 19% to $792.8M. Revenues reflect a 4.9% increase in comparable store sales and the acquisition of Randall%s Food Markets. Earnings also reflect higher margins due to continued improvements in buying practices and product mix.

December 31, 2000

The grocery business can be tough due to competition and generally low margins. However, Safeway has done a very good job of increasing margins through their deli, bakery, and other fresh foods operations. In addition, Safeway has been introducing other services to their customers by building partnerships with banks, such as Wells Fargo (WFC) and with coffee giant Starbucks (SBUX). After rising steadily over the past month, Safeway’s share price has reached a level that could entice the company to announce a split. The last 2:1 split was announced in conjunction with the January earnings release of 1998 when the stock was trading at $65.81. The next earnings release is tentatively scheduled for January 25th. Two technical indicators, the MACD, and the Money Flow look particularly strong. SWY is at a critical technical juncture. A move above Friday’s high of $62.69 would break the stock above a long-term double top pattern. If this occurs it could be very bullish. Recent trading has established support in the $59.00 to $60.00 range.

Picked on December 31st @ $62.50
Change since picked +0.00
Stop Loss @ $58.00

January 4, 2001

Safeway became a victim of the huge portfolio readjustment we have seen following yesterday's rate cut. Shares of Safeway had been slowly rising in recent weeks because it is perceived to be a defensive issue. The incredibly quick change in market sentiment has seen a rush to the exits among defensive issues. Now that the stock has dropped precipitously in two days, we can once again recognize the value of trading with stops.

Picked on December 31st @ $62.44
Profit/Loss -4.44 (-7%) (Stopped out Wednesday @ $58.00)
Best Profit -1.06 (-2%)

January 3, 2001

Hit stop, write up to follow.

January 2, 2001

Most stocks stumbled out of the gate to start the new year. However, shares of Safeway managed to stay afloat during the turmoil. It may be difficult for shareholders to shed shares of this company that appears to have so much going for it. SWY sports a P/E of only 28.37 and should increase earnings this year by 16%. It is also a viable split candidate. The company's last split was announced three years ago this month, when the stock was trading at $65.81. It is a reasonable assumption that another 2:1 split could be announced this month when Safeway reports its earnings on January 25th. With that said, it is probably important that the stock holds support at $58.00 or else a split announcement will become less likely. Despite today's understandable market related slippage, Safeway's stock maintains a positive technical picture. The MACD is rising and is comfortably in positive territory. The Money Flow chart is still one of the strongest in the market. Today's high of $61.38 should provide light resistance, followed by the recently established new 52-week high of $62.69. The 20-DMA should provide support at $58.16.

Picked on December 31st @ $62.44
Change since picked -2.00
Stop Loss @ $58.00