Ingles Markets, Incorporated (IMKTA): A Bull Case Theory

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We came across a bullish thesis on Ingles Markets, Incorporated (IMKTA) on Rock and Turner Investment Analysis’ Substack by James Emanuel. In this article, we will summarize the bulls’ thesis on IMKTA. Ingles Markets, Incorporated (IMKTA)'s share was trading at $71.05 as of Nov 6th. IMKTA’s trailing P/E was 8.46 according to Yahoo Finance.

A grocery store employee stocking shelves with fresh fruits and vegetables.

Ingles Markets, Inc. (IMKTA), a regional supermarket chain with deep roots in the southeastern U.S., offers a unique investment opportunity due to its significant real estate assets and its conservative, family-led management. Founded in 1963 and headquartered in Asheville, North Carolina, Ingles operates 198 stores across six states, primarily in small towns and suburban areas where it has established a commanding market presence. While its name may cause some confusion, suggesting a potential Spanish origin, Ingles is purely American, and its management’s conservative, long-term focus has protected shareholders' interests for decades. This stability is reinforced by the Ingle family's substantial ownership stake, with CEO James W. Lanning and Chairman Bobby Ingle continuing to lead the business with a clear commitment to shareholder value.

One of Ingles’ strongest advantages lies in its vast real estate holdings, with 84.3% of the land and properties it occupies under company ownership. Unlike most grocery chains that lease their locations, Ingles has steadily acquired land and properties, particularly in areas where real estate values have appreciated. This substantial property portfolio is, however, undervalued on its balance sheet, obscuring the company’s true asset value. Additionally, Ingles has strategically acquired land around its stores to prevent competitors from entering the vicinity, which strengthens its market position and builds a land bank with potential for future development or monetization. Off-balance sheet holdings through subsidiaries like "Sky King" and "Shopping Center Financing II" also indicate that the company’s true property value far exceeds what’s reflected in financial statements. Estimates, including those from Folly Partners’ Gwen Hofmeyr, suggest that Ingles' real estate portfolio could add $657.7 million in hidden value beyond reported figures. This significant asset value creates an unusual net-net scenario, where the grocery business could essentially be valued at less than zero, a compelling opportunity for value-focused investors.

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