Primark owner Associated British Foods is an overlooked gem going cheap — should you buy shares?

Associated British Foods, the owner of Primark, is a family-owned business, which means it is passed over by the increasingly popular passive investment funds. That spells opportunity for private investors, says Jamie Ward.

Primark shopfront
Clothes retailer Primark is wholly owned by AB Foods
(Image credit: Getty Images)

Primark sells bargain-priced clothes. Its products may not exactly be known for their durability, but its owner, Associated British Foods (LSE: ABF) (AB Foods), has endured for decades. And like its clothes, AB Foods’ shares look very cheap. In the last ten years, the company has become more profitable and executed its strategy well. Yet its shares have nearly halved. Even having fallen so much in the past ten years, however, over 30 years the shares are still up 14-fold. The company has been a great British success story and has the potential to carry on growing well into the future. Now is the time to consider an investment in this great business.

The cheap valuation seems nonsensical. It is probably a result of its unusual corporate structure, which has rendered it arbitrarily uninvestable to certain types of passive investor. Essentially it is a family business, with the Weston family maintaining effective control. As passive investment strategies have come to predominate in finance, shares in this type of conservatively managed family business are often left behind. This leaves a great opportunity for private investors.

Subscribe to MoneyWeek

Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE

Get 6 issues free
https://cdn.mos.cms.futurecdn.net/flexiimages/mw70aro6gl1676370748.jpg

Sign up to Money Morning

Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter

Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter

Sign up

Jamie is an analyst and former fund manager. He writes about companies for MoneyWeek and consults on investments to professional investors.