Why has Gerry Harvey bought up $76m of Harvey Norman shares in 2023?

Aussie billionaire Gerry Harvey, founder and chair of Harvey Norman Holdings Ltd (ASX: HVN), has been on a buying spree in 2023 – snapping up more than $76 million worth of the S&P/ASX 200 Index (ASX: XJO) company’s shares.

And the reason behind the bolstered stake might be a simple one. Harvey apparently believes the Harvey Norman share price is far too low.

Right now, stock in the ASX 200 furniture and electrical retailer – which also has its fingers in the property pie – is trading for $3.715.

Could it still boast as much as a 115% upside? Let’s take a look.

Gerry Harvey snaps up $75 million of his own company’s stock

The Harvey Norman share price has ultimately gone next to nowhere over the last five years, lifting just 8% over that time compared to the broader ASX 200’s 21% gain. Though, the retail stock boasted a peak of around $6 in 2021.

And the company’s boss thinks it can get back there – and beyond, encouraging Australians to sell their houses, cars, and boats and sink the cash into Harvey Norman shares, as per the Australian Financial Review (AFR).

The billionaire reportedly values his company’s stock at between $6 and $8 a pop – a potential upside of 61% to 115% on its current level.

No doubt Harvey hopes it could reach such levels.

He appears to hold around 421 million shares in the company. That’s over 20 million more than he held at the end of last year and nearly 33.8% of the company’s register, according to ASX data.

Indeed, the billionaire has snapped up 1.5 million shares for nearly $5.5 million over the week to Monday.

His current stake is worth approximately $1.5 billion today but could sell for around $3.3 billion if the Harvey Norman share price was to reach $8.

Has the market undervalued Harvey Norman shares?

The Harvey Norman share price tumbled 7% on the back of the company’s half-year earnings, released late last month. The company’s boss reportedly dubbed the sell off a “total overreaction”.

Neglected in the company’s valuation, Harvey told the AFR, is its property portfolio, valued at $3.9 billion according to its earnings report.

However, the entire company’s market capitalisation is just $4.6 billion right now – meaning the market appears to be undervaluing either its property holdings or its retail business.  

Goldman Sachs is bullish on the company on that basis.

It has a buy rating and a $4.70 price target on Harvey Norman shares – representing a 26% upside. It also expects the last half saw the peak of the company’s franchisee support costs.

The post Why has Gerry Harvey bought up $76m of Harvey Norman shares in 2023? appeared first on The Motley Fool Australia.

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Motley Fool contributor Brooke Cooper has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Goldman Sachs Group and Harvey Norman. The Motley Fool Australia has positions in and has recommended Harvey Norman. 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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