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What do you call a stock that skyrocketed in the Covid pandemic, and then crashed nearly 90% from its all-time high? You call it Ocado Group (LSE: OCDO). I’m wondering if it might be one of the best shares to buy today.
Since IPO in 2010, Ocado has polarised the investing world more than any I can think of in the past few decades.
It’s up 123% since launch. In that time, the FTSE 100 has gained 54%, and we can add around another 50% for dividends.
So, Ocado is comfortably ahead. But what a ride!
Fall from grace
At those peak Ocado share prices, we saw a 15-bagger. And few of us ever achieve those in our careers.
Still, those who didn’t sell when they were ahead won’t have either, and the painful crash to where we are now makes Ocado look like a huge failure.
It’s all led to the stock being dumped out of the FTSE 100. Index trackers that hold it then have to sell, and force the price down even more.
Ioannis Pontikis at Morningstar put Ocado’s fall down to “intense competition in the UK grocery market and a cost-of-living crisis, which traditional brick-and-mortar supermarkets were able to manage more effectively“. I can’t argue with that.
A fresh look
Here’s something I like to do with a stock that once had the adrenaline pumping, but then lurched from hero to villain…
Throw all that happened in the past out of the window, and start again with a fresh look.
Ocado’s focus on groceries might be a bit of a risk sometimes. Like when, say, Tesco‘s product diversity might have wider appeal in tough times.
And Marks & Spencer might not seem like the best partner for times when we have less spare cash to spend.
But in the better times that are surely ahead, when inflation falls enough for interest rates to drop, I think Ocado could be set up well.
Tech stock
In the past, Ocado has looked like a food seller whose shares were priced for high tech growth. Now I think I might see a tech growth stock priced like a corner shop.
Well, maybe not quite, as there’s no profit yet from which to work out a fair value. But at least, I do think investors might have taken their eyes off the potential for Ocado’s technology.
There’s robotics and AI in the mix as well now, which should help drive down operating costs.
Consensus
There’s only a soft buy consensus among analysts now. But they do tend to mostly push shares that are climbing, and turn bearish when they fall… has anyone else noticed that?
Analyst price targets are all over the place, from more falls to huge growth. These are often little more than guesswork, but they do show how much uncertainty there is.
Ocado would be hugely risky today, I think. Maybe even a boom-or-bust thing. Until there’s profit, there’s… well, maybe nothing.
But I might still buy a few shares. Not a lot, though.
