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The coronavirus may have cut off the access of millions of Americans to restaurants, but it has sent them to grocery stores in droves. 

Demand for food-at-home has shot through the roof. 

One jumbo grocer is hoping to capitalize this influx in an IPO this week and give its major investors an opportunity to cash out. 

That grocer, as you may have heard, is Albertsons (ACI). 

Albertsons, based in Idaho, owns 2,200 supermarkets around the country. That includes Safeway stores. 

In order to support the increased demand during the pandemic, they’ve hired an additional 40,000 workers. 

At a total of 300,000 employees, they’re able to support the 33 million customers per week that have recently been rushing to the stores. 

Albertsons’ market share currently sits at No. 1 or No. 2 in the majority of the metropolitan areas it serves, which has increased since the start of the pandemic. 

I’m liking Albertsons right now as a potential trade to go long on for a variety of other reasons which I’d like to share with you today. 

 

Albertsons’ Supply Chain Has Improved In Response to COVID-19

 

The kinds of stocks to look out for right now are ones that will actually benefit from the coronavirus by providing meaningful products and services to support cultural shifts.  

Albertsons has some significant goals to support this growth forward under the leadership of its new chief executive from PepsiCo, Vivek Sankaran. 

The company has adapted to the crisis by building up its curbside pickup process and other systems that will ease customer experience and transactions. 

They hope that this enhanced system of pickup in tandem with online ordering and use of self-checkout lines, will allow the company to cut costs and employ fewer people. 

They also hope to improve shipping and storage. 

The market for food retailing is massive in the United States and the growth is expected to continue in the years ahead. 

I believe that this combination of improvements could be a large factor in allowing it to drive growth and increase market share.

 

Aggressive Cash Out Measures Will Drive Albertsons IPO

 

One of the most interesting aspects of this IPO is where the IPO proceeds are going. 

A large number of insiders will be using the company’s recent growth as a good time to sell their holdings of the company. 

While chief executive Vivek Sankaran who will own stock worth $38 million will not be one of them, there are numerous noteworthy constituents that will. 

That includes the 4 largest stakeholders in the company whose plan is to keep the IPO proceeds for themselves and leave nothing for the supermarkets. 

3 of the 4 largest stakeholders are Lubert-Adler, Schottenstein Stores Corp., and Klaff Realty LP, and each of them plan to sell 10.4 million shares, worth $208 million each.

The largest of the 4 is the private-equity firm, Cerberus Capital Management, which has a stake of over 30% in the company.

Cerberus aims to unload 16% of their shares in the company, which will amount to about 28 million shares, worth $560 million. 

 

Trading Potential in Albertsons’ $1.5 Billion IPO Deal Look Strong

 

As far as the fundamentals are concerned, I think Albertsons (ACI) poses some compelling long-term opportunities, especially for those on the more conservate side. 

The key thing here is strong financial performance. 

Despite the IPO proceeds being kept by key stakeholders and not used to pay down the $6.7 billion in balance sheet debt, the company maintains strong cash flow. 

Sales last year increased to $62.5 billion from $60.5 billion in 2018. 

That equates to 2019 earnings of 80 cents a share, or $466 million, compared to 2018 earnings of 23 cents a share, or $131 million. 

A solid percentage of the yearly revenues will go to supporting the dividend program, which will give stakeholders $228 million per year. 

The terms of the IPO deal will be led by underwriters BofA Securities, Goldman Sachs, JP Morgan, and Citigroup

This will enable Albertsons to sell 65.8 million shares in a range between $18 and $20 a share.

I think it will provide a lot of trading opportunities and I plan to remain on the lookout for entries following the IPO.

If I do choose to trade Albertsons, my premium IPO Payday subscribers will be the first to find out. 

If you’re not already a subscriber and would like to learn more, grab a copy of my IPO Jackpots ebook here. 

Author: Ben Sturgill

Ben leads two services at RagingBull. IPO Payday can help you pinpoint, position, and profit from IPOs. In Daily Profit Machine Ben guides day and swing traders to profit by trading the SPY Index. Ben hosts the RagingBull.com weekly podcast WealthWise where he shares thoughts on wealth and success with traders, businesspeople, entrepreneurs, and experts to uncover and share the wisdom needed to live a wealthy life.

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