Many investors are attracted to a value based approach to investing. Buy good quality businesses on the cheap, and let the market prove you right. Fortunes are made this way. The catch is that there’s (almost) always a reason a stock is cheap. Deciding whether the current rationale for a low share price is temporary or permanent is a core skill for value investors.
Amazon is coming! The Chicken Littles of the share market are panicking. Many do not seem to know that Amazon commands a princely 3% of US retail sales. Their entry to Australia lifts competition, but it doesn’t lay waste to the retailing landscape. And in my view the associated sell down has brought some quality choices at lower share prices.
This argument is not new. However the price action in JB HiFi (JBH) suggests a lower risk entry:
Adding to the technical support is a lower PE, around 11x, and a dividend yield with franking of around 5.2%. This coincidence of technical and fundamental support increases the chances of a melt up in JBH’s shares.
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