Lockdowns and market announcements may be driving Wesfarmers shares higher.
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The Wesfarmers Ltd (ASX: WES) share price is having a year to remember.
At the time of writing, shares in the retail and industrial conglomerate are trading for $65.65 – down 0.61%. The S&P/ASX 200 Index (ASX: XJO), meanwhile, is 0.11% higher.
Since the beginning of the year, Wesfarmers shares are 30% higher. Compared to the ASX 200, which is up 11.7% year-to-date, it is outpacing the benchmark index.
Let’s take a closer look to see why.
What’s affected the Wesfarmers share price in 2021?
The biggest story of the year, for the Wesfarmers share price and the world at large, has been the COVID-19 pandemic.
In 2021, every state and territory in the country has been in (or, in the case of NSW, Victoria, and the ACT, is in) lockdown as the delta variant runs rampant.
Historically, consumer staple and retail shares have done well during lockdown. The theory is stay-at-home orders limit people’s options on what they can spend their money on.
Wesfarmers’ brands like Kmart, Officeworks, and Bunnings, are considered essential and can operate under stay-at-home orders – either through ‘click and collect’ services or in-store shopping.
Besides Covid, there are other factors that probably had a material impact on the Wesfarmers share price. Specifically, they relate to acquisitions and diversification.
On the acquisition front, in April, Wesfarmers’ subsidiary Bunnings announced the purchase of Beaumont Tiles for an undisclosed amount.
At the time, Bunnings Managing Director Mike Schneider said the purchase of Beaumont will allow the company to expand into further market segments.
Beaumont Tiles services both trade and consumer customers and has a specialised product and service capability that is not able to be offered through the Bunnings Warehouse format.
More recently, Wesfarmers launched its bid to buy 100% of shares in Australian Pharmaceutical Industries Ltd (ASX: API). API is the owner of retail pharmacy brand Priceline. The offer of $1.38 per share was rebuffed by API.
In a statement, the board said the Wesfarmers bid was opportunistic and undervalued the company. In August, reports emerged Wesfarmers renewed its interest in the company and was considering upping its offer. This saw the Wesfarmers share price rise.
Finally, Wesfarmers announced plans to further diversify the business in 2021. In July, the company declared it’s lithium mine in Western Australia was approved by the state government.
In August, it announced a partnership with Jemena for the transportation of green hydrogen. It seems Wesfarmers may see potential in the green energy sector.
Wesfarmers share price snapshot
Over the past 12 months, the Wesfarmers share price has increased 34.6%. It’s outperformed the ASX 200 by around 11 percentage points in that time.
Wesfarmers has a market capitalisation of $74.9 billion.
Should you invest $1,000 in Wesfarmers right now?
Before you consider Wesfarmers, you’ll want to hear this.
Motley Fool Investing expert Scott Phillips just revealed what he believes are the 5 best stocks for investors to buy right now… and Wesfarmers wasn’t one of them.
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*Returns as of August 16th 2021
The Wesfarmers (ASX:WES) share price is trading on a forecast 2.78% fully franked dividend yield
Could it be time to consider buying Wesfarmers (ASX:WES) shares?
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Motley Fool contributor Marc Sidarous 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 owns shares of and has recommended Wesfarmers Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.