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Is the Woolworths share price a secret buy?

The Woolworths Group Ltd (ASX: WOW) share price edged 0.8% lower yesterday, but is the Aussie retailer in the buy zone?

Why the Woolworths share price could be a secret buy

One thing that caught my interest yesterday was a trading update by SCA Property Group (ASX: SCP)

SCA reported that sales performance for a number of its tenants had been volatile due to the coronavirus pandemic.

However, anchor tenants, such as supermarkets, have seen strong moving annual turnover (MAT) as at 31 May 2020.

In fact, SCA’s supermarket tenants increased year-on-year MAT by 4.4% through to 31 May.

I think this could be a good indicator of Woolworths’ performance so far given its dominance in the supermarket space.

Because the Woolworths share price is up just 0.7% for the year, it may be undervalued right now.

For context, the Coles Group Ltd (ASX: COL) share price is up 11.5% in 2020 while the S&P/ASX 200 Index (ASX: XJO) is down 10.95%.

This means that the Woolworths share price is underperforming its rival but outperforming the ASX 200 benchmark.

However, Woolworths is more of a conglomerate when compared to Coles’ singular supermarket focus.

One particular drag in 2020 has been Woolworths’ pubs business, ALH Group.

Tight restrictions on the hospitality sector have hurt earnings from ALH this year. However, as restrictions ease, the group could prove to become more of an asset to the Woolworths share price.

If supermarket turnover continues to climb, combined with increased pubs revenue, this could spark the Woolies share price to climb in 2020.

Foolish takeaway

The Woolworths share price is roughly unchanged from where it started the year. 

However, the positive update from SCA Property yesterday has got me thinking about whether it’s undervalued.

Given the strong momentum behind ASX shares since the March bear market, I think Woolworths could be heading higher before the end of the year.

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Motley Fool contributor Ken Hall has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of COLESGROUP DEF SET, Wesfarmers Limited, and Woolworths Limited. 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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