why mts price did not follow 2 bad ratings?, page-7

Metcash is strong in logistics, getting the goods to the retailers. However, each IGA is independently owned and therein lies part of the explanation why Metcash has struggled. The two bigger ones (Coles, Woolies) own their branded stores. Our local IGA was very badly run - the vegetables were rotting on the shelves, the meat trays were unappealing, etc. And after the Qld floods in 2011, it got flooded out and Woolies stepped in and took over the site with one of their smaller stores, even though there is a big one just 5 minutes away. Woolies have squeezed out the smaller independents in my area by such tactics and who can compete with that?

The good news for me (as a holder of MTS) is that I think the bad news is indeed factored in. It might drift a bit lower, but the dividend is holding where I'd hoped, and still yielding very well. I bought at 3.99 and it will take me a couple of years of dividends from them to break even, and after that I should be ahead on dividends alone, even if the share price stays where it is. I'm a long term holder in my SMSF.

Metcash also has a new manager, are conducting a corporate review and diversifying into the delivery of liquor and hardware goods. They know there are problems. They are third in the rankings and they know they have to try harder. That's always a good thing.

I think the comparison to Telstra is a good one. I remember the TV commentators (YMYC) trashing Telstra and pulling faces when it was mentioned. Then suddenly it turned around and was the darling of the market again. When Woolies and Coles get over their price wars, which I believe will happen, the smaller independents will stand a fighting chance again.