Get Bullish on This Stock With Donald Yacktman
Anh is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
Donald Yacktman, the Co-Manager of the Yacktman Funds, is one of the most famous value investors in the world. He is consistently looking for companies with three main characteristics: Good business, good management, and low price. In the first quarter of 2013, Yacktman bought 1.75 million shares of C.H. Robinson Worldwide (NASDAQ: CHRW) at an average price of $61 per share, amounting to a total of nearly $107 million.
He bought into the company when it dropped significantly, from $67.20 per share in February to only $57 per share in March. Let’s take a closer look to determine whether or not we should follow Yacktman into C.H. Robinson?
A consistent grower with consistent cash flow generating ability
C.H. Robinson is considered as one of the biggest global third party logistics companies, providing freight transportation services and logistics solutions to more than 42,000 active customers through a network of 276 offices across the world, including North America, Europe, Asia, and Australia. In addition, C.H. Robinson also provides sourcing services for supplying fresh produce, through its network of independent growers and suppliers to grocery retailers, foodservice distributors, and restaurants. The majority of its revenue, $9.7 billion, or 85.4% of total revenue, was generated from transportation, while the sourcing revenue was $1.62 billion in 2012.
Historically, C.H. Robinson is quite a consistent grower. Revenue increased from $3.6 billion in 2003 to $11.36 billion in 2012, while the net income rose from $114 million, or $0.67 per share, to $594 million, or $3.67 per share, during the same period. The company has also grown its dividend in the past ten years, from $0.18 per share to $1.34 per share. Moreover, the company is also a cash cow, with its operating cash flow increasing from $109 million to $460 million since 2003. At the same time, its free cash flow climbed up from $101 million to $410 million.
What I am quite excited about the company is its conservative balance sheet. As of December 2012, C.H. Robinson had $1.5 billion in total stockholders’ equity, $210 million in cash, and only $254 million in short-term debt. The total stockholders’ equity has been lower due to the fact that C.H. Robinson has spent more than $200 million to buy back its shares, driving up the treasury stock amount to more than $1 billion.
At $59 per share, C.H. Robinson is worth around $9.5 billion on the market. The market values C.H. Robinson at as much as 12.4 times EV/EBITDA. It has the highest valuation compared to its peers, including Expeditors International of Washington (NASDAQ: EXPD) and Fresh Del Monte Produce (NYSE: FDP).
Expeditors is trading around $37 per share, with a total market cap of $7.7 billion. The market values Expeditors at a cheaper 11 times EV/EBITDA. Expeditors is also involved in the global logistics services business, including forwarding of air and ocean freight. The company has quite a diverse customer base, with no single customer accounting for 5% or more of total revenue. Expeditors’ customers seem to be loyal to the company, thanks to its excellent customer service. The company goes the extra mile to assist importers in clearing shipments through customs with document preparation.
Fresh Del Monte is the smallest company of the trio, with a total market cap of $1.56 billion. At $27 per share, Fresh Del Monte has the cheapest valuation at only 7 times EV/EBITDA. Fresh Del Monte is C.H. Robinson’s peer in the sourcing business. Fresh Del Monte is engaged in sourcing, transportation, and marketing of fresh-cut produce in Europe, Africa, and Middle East.
At the end of March 2013, Fresh Del Monte won a long licensing battle with its ex-parent Del Monte Foods, with $13.15 million of damages to be paid by Del Monte foods. The consumer trends of eating healthy would benefit Fresh Del Monte in the future, as more consumers has been eating more and more fresh fruit products to maintain a healthy diet.
In terms of dividends, C.H. Robinson offers shareholders the juiciest dividend with a 2.4% yield, while the dividend yields of Expeditors and Fresh Del Monte are 1.5% and 1.9%, respectively.
My Foolish take
With a consistently growing operating performance, consistent cash flow generation, and decent dividend yield, C.H. Robinson could be a good stock for investors to hold in the long run. I also like Fresh Del Monte due to the growing healthy eating habits of consumers, and the company’s low valuation.
Anh HOANG has no position in any stocks mentioned. The Motley Fool owns shares of Expeditors International of Washington. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!