If you read
the biography of Warren Buffet -- and a great read, I might add --
his diet provides a remarkably good divining rod for productive
investments. In case you don't know, Warren Buffett is a greater
disciple of hamburgers than Wimpy (if you're too young to know who
that is, check out J. Wellington Wimpy on Wikipedia). When Buffett
toured China with buddy Bill Gates, he suffered mightily in the
hinterlands of that country and beat a path to
) as soon as he got back to Beijing.
When Buffett announced he would acquire food company
) with 3G Capital for $72.50 per share in a sweetheart of a deal on
February 14 (wink), it sent food stocks soaring. Remember,
(NYSE:BRK.A) is not just a financial buyer. It is a strategic one
as well. The price of $72.50 was an important data point. It meant
the company felt the market missed something. Specifically, that
even at a 20% premium, Berkshire could make money forever.
The investment thesis is pretty straightforward: Everyone eats, and
they will never, ever stop.
Accordingly, if you are looking for long term investments, I would
recommend taking a look at the food companies listed below, and
initially, nibbling at them.
I say nibbling because it's a good pun, and because since the
Buffett/Heinz buyout, the group as a whole has jumped. For
), which was trading at $42.98, or about 16x trailing earnings on
February 13, is now trading at nearly $50, or more than 18x
trailing earnings. It's not that 18x is an egregious price, and I
would posit the "Buffett premium" is here to stay, but rather that
given the volatile, jumpy nature of our markets, I feel additional
entry points will present themselves.
Another by-product of dealing in the most necessary of all products
is that food companies tend to throw off a lot of cash. For
instance, sticking with GIS for the moment, the company has been a
stellar dividend payer and grower. Right now the yield is a healthy
3.1%. More importantly, though, over the past 10 years GIS has
grown its dividend from $0.55 per share to the current $1.55 share,
for a very heady compound annual growth rate of 10.7%.
Below is a list of food companies my firm likes, with the
associated earnings date in case you want to take a look.
Procter & Gamble Co.
Kraft Foods Group, Inc.
The Hershey Company
The J. M. Smucker Company
Dr Pepper Snapple Group, Inc.
China Botanic Pharmaceutical Inc.
Green Mountain Coffee Roasters, Inc.
Dean Foods Company
Terms of HNZ acquisition
Historical GIS P/E Ratio
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