Is Albertsons Companies, Inc. (ACI) a Cheap Food Stock to Buy According to Hedge Funds?

Albertsons Companies, Inc. (ACI) has been a subject of interest for hedge funds, with some prominent investors increasing their stakes in the company. As of the third quarter of fiscal 2024, 19 hedge funds held shares in ACI, with a total of 5.2 million shares added last quarter. This article will explore whether ACI is a cheap food stock to buy according to hedge funds, considering its recent performance, valuation, and the opinions of prominent investors.

Recent Performance and Valuation
ACI's recent financial performance has been mixed. The company reported a 2.0% increase in identical sales and a 23% increase in digital sales during the third quarter of fiscal 2024. However, its gross margin rate decreased to 27.9% compared to 28.0% in the same quarter last year. The company's net income was $401 million, or $0.69 per share, compared to $361.4 million, or $0.62 per share, in the same quarter last year. ACI's P/E ratio is currently around 11, which is relatively high compared to its peers in the food retail sector.

Hedge Funds' Perspectives on ACI
Several prominent hedge funds have expressed their views on ACI, with some seeing significant potential in the company. Cerberus Capital Management, which holds a significant stake in ACI, has been bullish on the company's prospects. In a recent interview, Stephen A. Schwarzman, co-founder and CEO of Blackstone, which also holds a stake in ACI, stated that the company is well-positioned to capitalize on the growing demand for convenience and digital services in the food retail sector.

However, not all hedge funds are convinced that ACI is a bargain. Some investors, such as Lee Ainslie of Maverick Capital and James E. Flynn of Deerfield Management, have sold their stakes in ACI, indicating that they may not see the same potential in the company as other hedge funds.

Conclusion
ACI's recent performance and valuation have been mixed, with some positive developments in digital sales and identical sales growth, but also a decline in gross margin rate. The company's P/E ratio is relatively high compared to its peers, which may indicate that it is not a bargain stock. However, prominent hedge funds such as Cerberus Capital Management and Blackstone have expressed their confidence in ACI's prospects, seeing significant potential in the company's digital and convenience offerings. Ultimately, whether ACI is a cheap food stock to buy depends on individual investors' risk tolerance and investment goals. While some hedge funds see significant potential in ACI, others may be more cautious about the company's prospects. Investors should carefully consider ACI's recent performance, valuation, and the opinions of prominent investors before making a decision to buy or sell the stock.