Why Stock Prices Of Retails Stocks May Go Up On ASX?
The Wesfarmers Ltd (ASX: WES) share price bounced back 4% at the time of writing after struggling for the last five days.
Shares in the conglomerate are trending up today amid reports mentioning the group is in the process of hiring new recruits to potentially establish a new healthcare fund.
With the group’s recent acquisition of Australian Pharmaceutical Industries (ASX: API) for circa $760 million, Wesfarmers has already embarked on its first escapade in the sector.
Many wonder what the group’s next acquisition might be and whether there is any link to the recent hiring events and its next moves.
Apart from WES new venture into healthcare, owners of Wesfarmers shares have something to celebrate this week. Hence, two of the retail conglomerate’s businesses were named Australia’s three strongest brands.
Bunnings has been crowned Australia’s strongest brand, while Officeworks came third.
Australia’s strongest retail brands
The Wesfarmers share price might be having a bad week. Thus, WES has slumped about 5% since last Friday’s close. Although, two of the company’s major businesses have claimed a new achievement.
According to the Australian Financial Review (AFR) reporting, Brand Finance Australia calculates a brand name “strength” using metrics including marketing investment, familiarity, loyalty, and reputation.
Brand Finance not only found that Bunnings is Australia’s strongest brand, but that its brand strength is also the most improved. AFR reportedly estimated the Bunnings brand to be worth approximately $4 billion, an appreciation by 46% year-on-year.
Bunnings’ place on the ranking was helped by its good response to residential and trade demand and by facilitating the vaccination rollout.
Officeworks is Australia’s third strongest brand, behind Woolworths Ltd (ASX: WOW). The business reportedly has an estimated valuation of $473 million.
What could be Wesfarmers’ next move?
Wesfarmers is valued at $59 billion by market cap. The company won the acquisition race to purchase API against its rival Woolworths (ASX: WOW).
There are talks of Wesfarmers setting up a healthcare fund to potentially target a big fish within the healthcare space with the momentum in place.
It is understood that Wesfarmers is targeting top executives in the health insurance space to build out its new venture. Hence, API would provide the basis of a new Healthcare division of Wesfarmers and a platform to invest and develop capabilities in this growing sector.
The drift into healthcare would not be a maiden venture for Wesfarmers. Thus, it has thought of investing in several healthcare assets over the years and sold off its underwriting business to Insurance Australia Group (ASX: IAG) back in 2013.
With the API acquisition completed, investors are undoubtedly keen to understand where the company will deploy capital over the coming years. With a trailing twelve-month cash flow of $413 million and a net profit of $2.3 billion, the company certainly has the credentials to make it happen.
At the time of writing, the Wesfarmers share price is $52.61, up by 4%.
Wesfarmers consistently outperform the Banking Sector
Since the last five years, Wesfarmers has consistently beat the big four. WES shares have returned more than 79%, whilst CBA, ANZ, NAB, and WBC lagged well behind.
Investors Also Asked These Questions
What are the best retail stocks to invest on ASX?
Wesfarmers (ASX: WES), Jb HiFi (ASX: JBH), Harvey Norman (ASX: HVN)
Who are the core competitors of Wesfarmers?
Kogan (ASX: KGN), Harvey Norman (ASX: HVN), and Myer Holdings (ASX: MYR)
What is the best banking stock to invest in 2022?
Commonwealth Bank of Australia (ASX: CBA) and Australia and New Zealand Banking Corp. (ASX: ANZ).