During its five years of existence, this company's stock has
risen 148 percent, while the
iShares Dow Jones U.S. Consumer Goods Sector Index Fund
- of which it is a member - has risen just 6.3 percent.
That outperformance, from a typically slow growth sector, is
worth taking a closer look at.
You're more than likely familiar with this company's products,
if not its name. The company is
TreeHouse Foods (
. Last year, TreeHouse saw its share price rise 32 percent.
In 2009, TreeHouse Food's stock returned investors a healthy 43
Based in Illinois, TreeHouse Foods says that in the United
States it sells more than half of the non-dairy coffee creamer
(Cremora and private labels), a third of the pickle products, and
nearly one-quarter of all salad dressings - not to mention
one-fifth of all canned soups. It also believes that it's both the
U.S.'s and Canada's largest producer of private label salad
dressings, drink mixes, and instant hot cereals.
These aren't exactly exciting products, but we don't look to
consumer staples stocks for excitement. We look to them for
consistent gains, and 75 percent over two years is pretty darn
While shopping for groceries most people seek out the best value
without sacrificing quality. During the recession, many Americans
turned to the store brands offered at
), Wal-Mart Stores (
as a cost-saving alternative to the national names.
This was a boom for TreeHouse, since it provides private label
products to retailers to resell under their own brand names.
Many shoppers are still skipping past better known offerings
Kraft Foods (
), Campbell Soup Co. (CPB)
Ralcorp Holdings (RAH),
to give the house brands a try ‑ and often they've found them to
their liking, especially from the savings aspect.
***TreeHouse Foods, with a market cap of $1.82 billion (2010 net
sales were about the same), has been running with the big boys. Its
largest customer is Wal-Mart Stores, accounting for 18.5 percent of
its annual sales in 2010. The company was created in 2005, as a
spin-off by dairy giant
Dean Foods (DF)
to shareholders of its specialty foods business.
Now, as the economic recovery solidifies I'm betting that many
consumers won't quickly jump back on board the brand name train -
rather they'll stick to their more generic, and value oriented
TreeHouse Foods made two strategic acquisitions in 2010,
spending $665 million on Sturm, a maker of private label hot cereal
and soft drink mixes, and $180 million for S.T. Foods, which
manufactures private label macaroni-and-cheese and other dinner
products. As it digests those deals, TreeHouse is carrying debt
approaching $1 billion.
Earnings per share in 2010 grew slightly over 2009, $2.51 vs.
$2.48. From 2008 to 2009, by comparison, EPS more than tripled.
***In the current quarter the consensus estimate from Thomson
Reuters calls for a 23 percent increase in revenue and a 13 percent
rise in earnings per share, to $0.66. I consider TreeHouse Foods a
nice growth play in a value sector.
I constantly seek out stocks that are undervalued, and the gains
that TreeHouse Foods posted reaffirm for me that small cap stocks
ALWAYS outperform coming out of a recession.
Click here to learn more
about this exciting class of stocks.