SuperValu Inc (SVU) is a high dividend stock. It has a dividend yield of 4.

02%, which is much higher than most of the other companies in the grocery stores industry. Defensive investors love stocks with strong dividends as such stocks can protect them from potential inflationary risks. The company added 132 stores through store development and closed or sold 87 stores during the fiscal year ended February 26, 2011. Chuck Royce, David Dreman, Charles Clough and many other well-known hedge fund managers invested a certain percentage of their portfolio in the stock. In this article, we are going to take a closer look at SuperValu and its comparable companies, including The Kroger Co (KR), Safeway Inc (SWY), and Delhaize Group (DEG) to determine which stocks promise higher returns for investors. SuperValu reported revenues of $8.4 billion for the third quarter of 2011. Second quarter operating income declined 23% to $216 million. The company has $6 billion in net debt on its balance sheet. Its EPS is $1.31 during the past 12 months. SuperValu is expected to earn $1.25 in 2011 and $1.23 in 2012. The stock recently traded at $8.67. Its current PE ratio is 65.19 as the company suffered big loss last year. Valuation: SuperValus earnings are not expected to grow over the next five years. Its PE ratio using its 2012 earnings is around 7.05, which is much lower than its current PE as the company began to generate positive earnings this year after its tough period in the last two quarters in 2010. Krogers earnings are expected to be $2.15 next year and its PE ratio using its 2012 earnings is around 10.93. Zacks estimated Kroger to grow at 9.73% over the next five years and therefore its PE using 2014 earnings is 9.07. Safeway is expected to earn $1.85 next year and its PE ratio using this number is 10.61. Safeways expected earnings growth is 10.38% and its corresponding PE in 2014 is 8.70. Delhaizes expected earnings in 2012 are $8.12 and its estimated PE using this number is 8.50. The company is expected to grow at 8.5% and therefore has an estimated PE using 2014 earnings of 7.23. SuperValus forward PE ratio is very low compared to other stocks in the group. Even other stocks future growth is taken into account, SuperValus forward PE is still lower. As we mentioned before, SuperValu suffered from losses in the second half of last year. Its stock price dropped about 50% and just rebounded a little bit recently. Thats why it is trading at a significant discount. As long as the company does not suffer big decline in its earnings, its stock price is likely to grow back to the true value. Volatility: Volatility is generally used as a measure of risk. SuperValus beta is 1.14, Krogers beta is 0.38, Safeways beta is 0.67, and Delhaizes beta is 0.62. SuperValus beta is higher than its comparable companies, indicating that the stock is more risky. Kroger has surprisingly low beta compared to other stocks in this group. Hedge Fund Ownership: Stocks that are favored by hedge funds tend to outperform the market by a few percentage points on the average. Kroger was the most popular stock among hedge funds at the end of second quarter. It was held by 22 hedge funds, including Steven Cohens SAC Capital Advisors,

Ken Griffins Citadel, and Israel Englanders Millennium Management. Safeway and SuperValu were also quite famous. There are 21 hedge funds bullish about Safeway and 17 bullish about SuperValu. Delhaize is less famous among hedge funds compared to other stocks. Only five hedge funds had Delhaize in their portfolio at the end of June. Insider Purchases: Stocks purchased by insiders tend to outperform the market on the average. SuperValu was purchased by three insiders over the past six months while other stocks do not have insider purchases in the same period. The most recent insider purchase of SuperValu occurred on August 8, when the EVP Chief Information Officer of the company, Wayne Shurts, bought 3,000 shares at $6.81. A day before that, Keith Kravcik, GVP Controller at SuperValu, bought 2,200 shares at $6.87 and $12,800 shares at $6.78. The director of the company, Donald Chappel, also bought 10,000 shares in May. Insiders know their companies and industries better than almost all other investors. They also have material non-public information and sometimes trade based on such information. Therefore, strong insider interests in SuperValu indicate that the stock has a great potential to grow in the near future. Overall our analysis points out that SuperValu is undervalued compared to other stocks in the group. Strong hedge fund interests and insider purchases also indicate some form of perceived value in the stock. Although the stock has a high beta compared to others, the company suffered loss last year and recovered this year, leading to the vibration in the historical stock price. We like SuperValu and we urge investors to do an in-depth analysis of the stock for their portfolios. Hedge Funds