Woolworths: Risk Reward Becomes More Compelling

Last month, Evidente published an open letter to the Woolworths CEO, Grant O'Brien, suggesting that a lack of corporate focus had contributed to the company's poor recent performance. I remain concerned about the ability for Mr O'Brien and his senior team to effectively manage the turnaround of number of disparate and under-performing businesses, particularly Big W and Masters. But the announcement at the recent strategy day to re-allocate capital towards its supermarket business is a welcome development. At current levels, analysts and investors have become unduly pessimistic about the company's future growth prospects. I recommend that investors neutralise their underweight bet in the stock and use any renewed price weakness to start building an overweight position. (VIEW LINK)