As an investor, if you could have one superpower-like technology, what it would be?
Personally, I think the ability to travel through time would be pretty neat.
Imagine buying all those stocks that made you think 'what if', or the disastrous investments you could've avoided.
Unfortunately, I'm thoroughly convinced only Mr. Market can offer us the chance to buy great businesses at prices we could only dream about.
For example, two years ago, if I asked: 'Would you buy Woolworths Limited (ASX: WOW) shares below $25?' your first response would likely have been to pull out your wallet.
Source: Yahoo! Finance
…but oh, how times change in the sharemarket.
Indeed, little has changed in the Australian grocery market (Aldi's been here for more than 10 years), but a modest fall in profit and a management reshuffle has completely spooked investors.
Two years ago, Woolies shares were changing hands at $35 – later seeing a peak of $38.49. Now, Woolies shares are trading nearly 30% lower, and the outlook is dire, according to some.
Are Woolworths Limited shares a bargain below $25?
Personally, I think a stock can only be called a 'bargain' when they trade at a discount of 30% or more to what I believe their intrinsic worth.
Meaning, for Woolworths to be a bargain today, it'd have to be worth (to me) around $32.50 (i.e. 1.3 x $25). Unfortunately, I don't think they're worth that much.
I've said it before, but I think Woolies shares are worth around $28. Therefore, in an ideal world you'd want to buy it around $21.50.
However, it's very rare for a highly-followed blue-chip dividend-payer like Woolworths to trade at bargain levels.
Indeed, if it weren't for the uncertainty provided by an outgoing CEO, I'd probably say Woolworths is a sound investment for income over the medium term at today's prices.
But although investors could do far worse than buy Woolies shares until we get some clarity on the CEO appointment I think it's currently closest to a hold.
