Buy Sainsbury Sell Marks and Spencer

I've just performed some analysis both companies and thought I would share it with the group.

It appears that either Sainsbury is undervalued or Marks and Spencer is overvalued. Not sure which it is.

My rationale for this is looking at both market capitalisation and turnover. M&S has proportionally higher market cap if you compare turnover to Sainsbury.

That is fine in so far as M&S margin is greater.....at least it used to be, but not anymore.

It has started introducing branded products as its market shares has been decreasing. Therefore the valuation of the company cannot be on the basis of higher margins in comparison to its peer group. Its margins will now be the same as Tesco / Sainsbury.

One other point to note is that M&S long term strategy overseas has not been great and its management lack the expertise in geography outside of the UK, Sainsbury is however much better place for this overseas strategy.

You will probably need to hold this position for around a month. There has already been overperformance on Sainsbury compared to M&S for the last month, however I think there is still someway to go.

I have done a much fuller report which you can have access to for £5,000.

Note : I know nothing about spread-betting, I only use CFD's.

You need to have a look at the correlation of the two over the last ten years or so. I think you will find it pretty highly correlated (maybe 95% or higher). If you find that this correlation has diverged then you should go long one, short the other- when they converge again you will make money. Classic relative value trade.

Yes.....thanks for that.....the title did say "Buy Sainsbury Sell Marks and Spencer" Im not expecting a convergence, more a divergence

"I've just performed some analysis both companies" + "Not sure which it is" = "i'm out"

If you read the post.....and acted on it you would have been quids in......thats like 4 tips and 100% success - see earlier posts on eur/usd, porschce and some others.

The post says...."It appears that either Sainsbury is undervalued or Marks and Spencer is overvalued. Not sure which it is. ". But the trade is on the difference not the absolute.

Ps are you a real sheik, like an arab ? Im looking to sell my wife

hmmm, you need to look historically about how far they have diverged already. provided that correlation is as tight historically as i would expect then you would be taking a big risk trying to make money from a further divergence. why dont you just go long Sainsbury's?

If the market moves down 20% then Sainsbury will move down 20%. Besides the valuation on M&S is in comparison to Sainsbury not against the market.

Hey UKdaytrader,
No offence intended on my posts- just trying to put forward a different school of thought on the matter.
M&S and Sainsuby's do the same thing. They also make the majority of their money in the UK, not overseas. Therefore if one turns a big profit then the other most likely will do the same.
Do you really think that you will see such a change in overall performance between the two companies in ONE MONTH to warrant them diverging further?

ukdaytrader said:

If the market moves down 20% then Sainsbury will move down 20%. Besides the valuation on M&S is in comparison to Sainsbury not against the market.

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It's called a stop-loss pal

ukdaytrader said:

If you read the post.....and acted on it you would have been quids in......thats like 4 tips and 100% success - see earlier posts on eur/usd, porschce and some others.

The post says...."It appears that either Sainsbury is undervalued or Marks and Spencer is overvalued. Not sure which it is. ". But the trade is on the difference not the absolute.

Ps are you a real sheik, like an arab ? Im looking to sell my wife

Click to expand...

Im not sure if you can class following what you heard on bloomberg as one of your tips...is more joke than a tip...am pretty sure this a joke...whatever it is, its funny.

Also this isn't a journal. Keep up the good work big guy, you make me smile.

ukdaytrader said:

Ps are you a real sheik, like an arab ? Im looking to sell my wife

Click to expand...

You pay me £5000, i write a "research" paper on your wife

i will need your wife for approximately one hour each day for five weeks

At the end of the "study" period, you will give me two camels

It was my economic model that threw out the eur/usd trade, and the porchce one was through significant anlaysis as was this one I have recommended in this post which has come in better than expected.

theSheik said:

You pay me £5000, i write a "research" paper on your wife

i will need your wife for approximately one hour each day for five weeks

At the end of the "study" period, you will give me two camels

Click to expand...

I dont want to lend, lease or do any kind of sale and leaseback........Im looking for a permanent sale.........

"I heard on Bloomberg today that the Euro is set to weaken against the dollar so I have sold a few contracts Euro and Bought USD."

Your so funny.

Well I earlier stated that Bloomberg moved markets......but I got a lot of resistance and non belief.....So now Im using my own economic and valuation models.........and now everyone is saying that Bloomberg said this........you just cant win.

No mention of Sainsbury or Marks and Spence on Bloomberg today though........

Well your right abandoning bloomberg cos that is the biggest pile of w"ank i've ever heard of and i used to work in a sperm bank. But if you followed their advice in the first place i would hazard a guess that your "models" aren't going to be filled with a huge amount of wisdom.

i didn't say that bloomberg said this, i merely said telling someone ur awesome at trading cos you managed to work out what bloomberg was saying and then clicking a button is slightly misleading.

You can't win though, everyone is so mean.

x

haha this is hilarious. I forgot about the £5000 you wanted for your trading plan in which you don't know whether to buy or sell M&S and Sainsuby's...

Don't quit your day job 'Ukdaytrader'

Its too late I've already quit.......the banking crises and the curbs on executive pay forced me out.

Oh no! thats terrible, you reli cant win. I advise you to keep posting here cos your so much fun and you might be able to make a living as a stand up if trading doesn't work, your so funny.