Why this expert reckons the Woolworths (ASX:WOW) share price is on special

The supermarket giant could be a good pick amid a volatile stock market…

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a happy, smiling woman rides on the back of a trolley down the aisles of a supermarket.

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The Woolworths Group Ltd (ASX: WOW) share price will be closely monitored this month after one fund manager picked it as a defensive star in turbulent times.

The supermarket giant’s stock price is already 17.8% up for the year, and a whopping 66% over the past 3 years.

But with the S&P/ASX 200 Index (ASX: XJO) taking investors on a stomach-churning rollercoaster of volatility the past couple of months, reliable and steady assets are looking more attractive.

Pengana Australian Equities Fund analyst Mark Christensen told a webinar this week his fund is now positioned defensively.

“Woolworths is obviously a very defensive stock.”

Woolworths has the nirvana of pricing power on both sides

Shares in Woolworths are compelling because the retailer has the ability to set its own price, which is important in a climate of rising inflation and interest rates.

But there are many companies that have pricing power, you say.

The difference with Woolworths, according to Christensen, is that its market position is so dominant it has pricing power on both sides of its supply chain.

“It has the pricing power to push back on inflation impacts from its suppliers, and pass on any pricing [rises] it feels it needs to its customers,” said Christensen.

“If you’re able to increase the value of each box you sell, but sell the same number of boxes, then that’s a good equation for your bottom line.”

Woolworths shares are also currently paying out a 2.73% dividend yield, which is also a tidy benefit during volatile times.

Like its competitors, Woolworths has had to battle staff shortages in Victoria and NSW in recent weeks due to COVID-19 isolation requirements. It even had to close some stores temporarily.

But with NSW hitting the 70% fully vaccinated milestone this week and reopening the economy on Monday, the problem is expected to be short-lived.

Victoria has more than 55% of its adult population fully vaccinated against the coronavirus, and will also open up in stages when that figure hits 70% and 80%.

Should you invest $1,000 in Woolworths right now?

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Motley Fool contributor Tony Yoo has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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