Grocery stores are hardly an exciting business. The grocery game is notoriously low-margin thanks to frugal shoppers and high competition, the nature of a national distribution network for perishable foods can be maddening, and most grocery chains are regionally landlocked with little room for growth.
So what gives with Safeway (SWY)?
Well, to start the year, roughly one-third of outstanding Safeway shares were held by short sellers — that is, investors betting against the company. But rumblings about a potential buyout either for all or part of the company sent the bearish investors scurrying for the exits and boosted the stock. From January to April, SWY tacked on more than 60%.
Shares then rolled back a bit as the hubbub waned, but more recently word that an aggressive hedge fund took a big stake in Safeway has rekindled rumors of buyout prospects — or at least an ambitious new mission to unlock value.
As a result, after a sleepy summer, Safeway stock is up about 25% in the past few weeks, making SWY one of the best stocks in the entire S&P 500.