|Written by GSCR Staff|
|Wednesday, 12 February 2014 23:48|
No doubt today’s headline is imprinted into the pop culture lexicon from America’s favorite under achiever, Homer Simpson. Another classic is an episode where Lisa states that she is going to become a vegetarian and not eat any animals anymore. Homer asks her if she is going to give up ham, pepperoni, and most importantly bacon and Lisa replies that these all come from the same animal. Homer replies chuckling in disbelief,”…right Lisa, a wonderful, magical animal!”
Where are we going with Homer? Yesterday there was a great article in MarketWatch about the bacon industry and how, despite a poor economy, it is generating unprecedented revenue for restaurants, food suppliers, and kitchenware manufacturers. Here is the link below.
The market research firm Information Resources, Inc. (IRI) reported that bacon sales have increased annually over the last four years and in 2013 alone, sales climbed 9.5% to an all-time high of nearly $4 billion. Another tidbit from the article we enjoyed is the appearance of bacon related gastropubs popping up in major cities, like BarBacon in NYC’s Hell’s Kitchen district. Clearly the rough economy is not affecting this industry.
The question is why is this important for John or Jane Q investor/trader and what macro-economic forces will benefit related stocks. Clearly the rough economy creates an atmosphere of the consumer ingesting comfort foods like bacon and even spirits. Case in point, last April we highlighted Craft Brew Alliance (NASDAQ – BREW) and the stock is up 106% since! The second factor in play is the overall rise in price in food and commodities associated with food products. At the basic level there can be no substitution as everyone needs to eat.
We looked over some stocks with some exposure to the pork industry, and yes bacon, and with an overall diversity in products. Tyson Foods, Inc. (NYSE – TSN - $36.89) may be out of our market cap and price range but is a solid play on our themes above with a diverse portfolio. On a micro technical level TSN is very bullish all the way out to the 50-day DMA. Additionally, forecast revenue for the rest of FY14 and Q1 FY15 put the forward 12-month P/E at 12, under the trailing 12-month P/E of 15, a great signal in basic valuation.
Tyson is a strong brand with a presence in almost every grocery chain in the United States. Additionally, the Company continues to try and grow organically, with introductions like its first breakfast line Tyson Day Starts™. We think the stock is great play this year in the food industry. The $45 level is an achievable target.
Have a great day!
Disclosure: Goldman Small Cap Research analysts are neither long nor short these shares but may elect to purchase the stock within the next 48 hours.
This Market Monitor blog was prepared for informational purposes only. Goldman Small Cap Research, (a division of Two Triangle Consulting Group, LLC) produces research via two formats: Goldman Select Research, which typically highlights small cap companies, and Goldman Opportunity Research, which features micro cap companies in a sponsored research format. Thus, the Select product reflects the Firm’s internally generated stock ideas while the Opportunity product reflects sponsored research reports.
Goldman Small Cap Research is not affiliated in any way with Goldman Sachs & Co.
It is important to note that while we may track performance separately, we utilize the same coverage criteria in determining coverage of all stocks in both research formats. Please view the company’s individual disclosures for each engagement, which can be found in each company-specific report. All information contained in this blog, newsletter and in our reports were provided by the Companies or generated from our own due diligence. Our analysts are responsible only to the public, and are paid in advance to eliminate pecuniary interests, retain editorial control, and ensure independence. Analysts are compensated on a per report basis and not on the basis of his/her recommendations.
The information used and statements of fact made have been obtained from sources considered reliable but we neither guarantee nor represent the completeness or accuracy. Goldman Small Cap Research did not make an independent investigation or inquiry as to the accuracy of any information provided by the Company, or other firms. Goldman Small Cap Research relied solely upon information provided by the Company through its filings, press releases, presentations, and through its own internal due diligence for accuracy and completeness. Such information and the opinions expressed are subject to change without notice. A Goldman Small Cap Research blog, report, note, or newsletter is not intended as an offering, recommendation, or a solicitation of an offer to buy or sell the securities mentioned or discussed.
This blog does not take into account the investment objectives, financial situation, or particular needs of any particular person. This blog does not provide all information material to an investor’s decision about whether or not to make any investment. Any discussion of risks in this presentation is not a disclosure of all risks or a complete discussion of the risks mentioned. Neither Goldman Small Cap Research, nor its parent, is registered as a securities broker-dealer or an investment adviser with FINRA or with any state securities regulatory authority.
ALL INFORMATION IN THIS BLOG, REPORT OR NEWSLETTER IS PROVIDED “AS IS” WITHOUT WARRANTIES, EXPRESSED OR IMPLIED, OR REPRESENTATIONS OF ANY KIND. TO THE FULLEST EXTENT PERMISSIBLE UNDER APPLICABLE LAW, TWO TRIANGLE CONSULTING GROUP, LLC WILL NOT BE LIABLE FOR THE QUALITY, ACCURACY, COMPLETENESS, RELIABILITY OR TIMELINESS OF THIS INFORMATION, OR FOR ANY DIRECT, INDIRECT, CONSEQUENTIAL, INCIDENTAL, SPECIAL OR PUNITIVE DAMAGES THAT MAY ARISE OUT OF THE USE OF THIS INFORMATION BY YOU OR ANYONE ELSE (INCLUDING, BUT NOT LIMITED TO, LOST PROFITS, LOSS OF OPPORTUNITIES, TRADING LOSSES, AND DAMAGES THAT MAY RESULT FROM ANY INACCURACY OR INCOMPLETENESS OF THIS INFORMATION). TO THE FULLEST EXTENT PERMITTED BY LAW, TWO TRIANGLE CONSULTING GROUP, LLC WILL NOT BE LIABLE TO YOU OR ANYONE ELSE UNDER ANY TORT, CONTRACT, NEGLIGENCE, STRICT LIABILITY, PRODUCTS LIABILITY, OR OTHER THEORY WITH RESPECT TO THIS PRESENTATION OF INFORMATION.
For more information, visit our Disclaimer: www.goldmanresearch.com