Investor day insights from two recently volatile sectors

Hard to think of two more recently volatile sectors than food retail and gold mining.  Of course I am invested in both :-)   More seriously these are two sectors I see real opportunities in over the next year.

In food retail my second largest position is Morrison's the smallest of the big four UK supermarkets. I last wrote about the company here and recently they augmented those tentative improvements with a bolder trading update which highlighted better than expected performance on debt reduction (as well as a continuing sales revival).  As the share price over the last year shows we are still at the early stages of any turnaround:

So last week's investor day (it has taken me nearly a week to get hold of the presentation...) was of great interest and, I believe, importance.  There was no overt trading update other than a reiteration of prior statements, this was more about the retail underpinnings to the turnaround.

I liked the way the company started the presentation.  It is always good to be clear what you stand for...and value and a focus on fresh food is as good as anything:

The two charts that really caught my attention were perhaps the ones where they showed the greatest differentiation with the other big supermarkets - as the smallest of the 'big four' you have to be different to survive.

And then there is the manufacturing.  Certainly Morrison's vertical integration is higher than any of the other big four.  

Overall thoughts?  Interesting and a forward step but no huge surprises - and perhaps there should not be in any case.  I still feel comfortable with the turnaround and understand some of the underpinnings better.  Now it is time for delivery.  Next stop the post Christmas trading statement.  

Turning to the gold sector today Acacia (formerly African Barrick Gold) held an investor day.  Many moons ago I was invested in the then African Barrick Gold and ultimately was disappointed by the underlying business execution given that - as shown below - the reserve grade of the business was always fantastic (and even better than my favourite two gold stocks Randgold Resources and Polymetal).  

Where it all went wrong was nicely captured by this chart which showed the terrible position on the industry cost curve the old ABG was at.  Unsurprisingly when the gold price fell so did their share price.  Note though where Acacia aspire to be 'moving to the 1st quartile' with a cost profile closer (but not as good) as someone like a Randgold: 

I note throughout the presentation today the company talked about many of the softer issues Randgold (in particular) highlight such as partnership with local communities and relevant governments.  Acacia operate primarily in Tanzania (in contrast to Randgold in Mali, Cote d'Ivorie and the DRC) but have hopes to expand into countries like Kenya and Burkina Faso as noted below.  

Whilst hearing about expansion hopes the key shorter-term is cost control and taking full advantage of the underlying grade in the Tanzanian operations.  I was quite heartened by what I heard which including some fascinating insights into the importance of their position in the Tanzanian economy.  Improving relations/driving the partnership with important Tanzanian actors is all important. It is good to see they have reduced the expat workforce and proportionately now rely much more on local labour (although not to the extent that Randgold run their operations).

Overall a good effort by Acacia.  They are on my watch list for possible investment although it is clear to me that despite being an Africa focused gold operator they are no Randgold.  Still - compared to some generalised poor performers across much of the global gold mining industry - they are now of above-average interest.

Two interesting investor days in good value/opportunistic parts of the market.