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WOOLWORTHS HOLDINGS LTDWOOLWORTHS HOLDINGS LTDWOOLWORTHS HOLDINGS LTD

WOOLWORTHS HOLDINGS LTD

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WHL trade ideas

Not a buy at just yet!Woolworths is a South African retailer that has struggled over the last few years starting with a purchase of the Australian retailer David Jones which took place in 2014 at a large premium to its intrinsic value. Woolies has since had to write down the value of its David Jones holding by around 60%. Ouch! The company's current CEO appears to have a viable turn around strategy with a focus to improving their online sales. The question is, how effectively can they grow their earnings going forward? The company has taken on a fair amount of debt compared to its historical debt levels, however, most of their debt is structured over a long period of time. This gives them time to improve their free cash flow over the next 3 -5 years. Their average annual free cash flow over recent years is around 4.5% - 5%, which isn't where share holder would want it to be. The worrisome aspect for me is the fact that their effective interest on debt is around 8.5% per annum. To me that draws a line in the sand to say that they need to grow their earnings by at least 10% per annum. Which could be possible under a favorable economic environment and a successfully implemented turn around strategy. For the time being i wouldn't have the conviction to take a meaningful stake in the company. Trading signal For the time being the signals on the weekly chart suggest that the price may need to retrace further which could complete a head and shoulder pattern which i have shown on the chart. We should have confirmation on this in the next 1.5 - 2 months. Please like and follow for daily posts on various asset classes. Please also share your views on the trading ideas and whether or not you find them to be of any value to you as a trader. Please note, this idea is shared for educational and discussion purposes only and should not result in speculative investment decisions in any asset class.
JSE:WHLShort
by JesseMorgans
Woolworths, something to think about. More educational than anything... Many people would've taken this breakout earlier in the day which ultimately came back down and didn't close above resistance. When swing trading breakouts I like to enter towards the end of the day which gives me a better understanding of how the market is acting and what the volume looks like. Also as with most JSE shares that are breaking out at the moment we notice they have run a fair bit so far and a lot of these breakouts may be in the over brought areas. I like to trade breakouts that have been building a base under resistance for a few days as indicated on the chart. At the moment if you missed breakouts you can look for retests of the original breakout in the coming days to enter.
JSE:WHL
by Danerutherford