Over the past month some investors have been watching closely as the share price of Wesfarmers Ltd (ASX: WES) has rallied around 5%, while the shares of Woolworths Limited (ASX: WOW) have basically flatlined. Even the S&P/ASX 200 Index (Index: ^AXJO) (ASX: XJO) is outperforming the supermarket giant having added nearly 3%.
What's happened?
The major cause of the divergence in performance would appear to be positive versus negative news flow. While Wesfarmers has been announcing the closing of huge deals such as the sale of its insurance underwriting division for $1.845 billion to Insurance Australia Group Limited (ASX: IAG) and announcing a significant move into financial services under its Coles brand; the major news flow around Woolworths has been more speculation that the hardware venture Masters continues to bleed money.
Should investor switch?
Long-term investors will not be concerned specifically with short-term share price performance and this is not a cause for switching. If however there are larger, overarching factors at play then investors should rightly be concerned. Given Wesfarmers have more earnings growth drivers it is arguably the more appealing investment opportunity. Meanwhile if the Masters venture continues to worry investors it could in fact create an opportunity for investors to buy into a superb business at a lower price.
