When I invested in Greggs (LSE: GRG) in the past year, it was because I thought the shares looked cheap.
Since then, though, they have gone nowhere fast!
The Greggs share price is down 16% over the past 12 months. Simply since the start of this year, it has fallen 5%.
Hanging onto my shares has come with an opportunity cost, as the FTSE 250 (of which Greggs is a member) is up 3% so far this year.
In other words, owning a FTSE 250 tracker would have given me better returns thus far in 2026 than hanging onto my shares in the nation’s leading bakery chain.
So, why have I done that?
The importance of an investment case
Some people invest based on momentum.
They look at a chart, or historical highs or lows, and reckon that, sooner or later, there ought to be a pattern.
Tempting though that can be, I try not to do it. There is no guarantee that a company or share will do as well (or as badly) in the future as it has in the past.
Instead, I try to focus on two questions.
The first is what a share’s investment case is, independently of its price.
The second question is how attractively priced the share currently is (or not) given that investment case.
The market can misprice an investment case for years. But sooner or later, often a strong investment case will out.
In the case of Greggs, I think there is one.
In a nutshell, it is that people need to eat and Greggs offers – at scale – a value proposition for takeaway food customers that is difficult to beat.
Customers seem keener on Greggs than the stock market is
Still, that has been true for some time – yet Greggs shares keep doggedly underperforming.
The past five years have seen a 38% drop in the Greggs share price. The FTSE 250 is in positive territory for that period, even if it is only up 2%.
What is going on?
I think the market has successfully identified multiple risks for the baker.
They include mounting employment costs given a labour-intensive business model, higher energy bills eating into profit margins, customer fatigue growing as Greggs keeps expanding its shop estate, and problems with matching its offering to the weather.
Waiting for a market reassessment
All those risks strike me as relevant things to consider now when assessing Greggs shares.
But I feel that the market continues to focus on the risks without necessarily also paying attention to the fact that Greggs continues to grow strongly, is profitable, and has unique market strengths thanks to its brand, customer base, and product offering.
Sooner or later I expect there will be a reassessment, when that ongoing growth means investors revisit the fundamental attractiveness of the company’s investment case.
That may take some time, but as a buy-and-hold investor, I am in no rush. Meanwhile I am earning dividends simply for owning Greggs shares. Currently, the yield is 4.3%.
Should you invest £5,000 in Greggs Plc right now?
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Christopher Ruane owns shares in Greggs.
