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Should you buy Harvey Norman shares at a 52-week high?

The Harvey Norman Ltd (ASX: HVN) share price jumped 2.15% higher in yesterday’s trade to close at a new 52-week high of $4.76 per share.

Given the Aussie retailer’s shares have surged more than 50% so far this year, is there still time to buy Harvey Norman shares or are there better options on the ASX?

Why the Harvey Norman share price climbed higher

Despite no company-specific news from the company since early August, the Harvey Norman share price has been quietly surging higher this reporting season.

I think the biggest catalyst for yesterday’s moves wasn’t to do with the company itself, but the Aussie retail sector.

Fellow Aussie retailer City Chic Collective Ltd (ASX: CCX) saw its share price hit a 12-year high of $2.00 on Tuesday following a strong earnings result that showed increasing profits and margin expansion.

This saw several other retailers’ share prices climb higher, with Harvey Norman among that group, as ASX investors saw hope of a turnaround in domestic retail conditions.

Can Harvey Norman shares climb higher in 2019?

At $4.76 per share, the Harvey Norman share price is trading at just 14.4x earnings while also offering investors a 6.3% per annum dividend yield.

This mix of a low price-to-earnings (P/E) multiple, indicating good value, and high dividend yield, indicating good income, doesn’t come along very often – let alone at a 52-week high valuation.

While there are others in the sector that I like the look of, including Ltd (ASX: KGN) which climbed 2.2% higher yesterday, it’s hard to argue against Harvey Norman purely from a relative value perspective.

Kogan is currently trading at 40.3x earnings with a 2.38% p.a. dividend yield, while also boasting about half the market cap of Harvey Norman’s $1.2 billion.

So, should I buy Harvey Norman shares?

While the relative value play looks compelling, I do worry about Harvey Norman’s heavy bricks-and-mortar retail exposure in the long-term against the likes of Amazon and Kogan.

The significant assets tied up in its stores makes Harvey Norman inherently less nimble than the online-only Kogan, and I do prefer Kogan’s diversification strategy into superannuation, healthcare and travel (to name a few).

With Harvey Norman set to report earnings before the end of August, I’d be sitting tight and making a buy or hold decision based on more complete information.

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Motley Fool contributor Kenneth Hall has no position in any of the stocks mentioned. The Motley Fool Australia has recommended ltd. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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