3 Pepper-Uppers for Your Portfolio
AnnaLisa is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
Whose portfolio couldn't use a little Vitameatavegamin? Not everything has soared in this run to Dow 15,000. Maybe you need a little diversification and are looking for some promising small caps.
You probably remember the classic I Love Lucy skit where Lucy gets drunk while filming a commercial for the alcohol-laced tonic. But seriously, using the Motley Fool.com stock screener (look under the CAPS tab) I discovered three portfolio perker-uppers. These food and beverage related stocks likely aren't on your radar but should be. Mmm, and they're so tasty, too. Calavo Growers (NASDAQ: CVGW), Seneca Foods (NASDAQ: SENEA), and National Beverage Co (NASDAQ: FIZZ). All have 4 or 5 star CAPS ratings and insider ownership. This total return chart speaks volumes about the peppy power of these small cap names.
A zesty pepper upper
Calavo Growers, which grows and distributes avocados, avocado products, tomatoes, mangoes, and pineapples has been surging thanks to the huge popularity of salsa, hummus, tortilla chips, and guacamole, all of which it makes. Salsa overtook catsup some time ago as most popular US condiment and hummus is an up-and-comer. Calavo Growers' future growth trajectory is particularly bright with its recent promotion and advertising campaigns on the internet and television.
Although some of its latest success is attributable to the growing US Hispanic population, avocados are exponentially more popular globally than a decade ago. Calavo has a 25 trailing P/E and a 17 forward P/E and offers a 2.20% yield at a 57% payout ratio. Margins have remained stable over the last five years and as Fellow Fool Seth Jayson concludes, Calavo looks fine.
There's much to like about Calavo Growers like its 18.61% insider hold but one concern is the compensation of major officers is high for a company with only a $437.1 million market cap. Chairman and CEO Lee Cole receives $1.4 million. The compensation issue brings their corporate governance risk score to 5.
The company is moving into the cloud with its own fresh food technology platform company, Fresh Realm LLC. The platform will link fresh food producers to communities and food banks in a national ecosystem. Announced in March it's too early to tell what effect, if any, to the bottom line but it does show they're tech-savvy.
Sales, dividend, and EPS growth for the last five years were in the teens with EPS growth at 17% and dividend growth at 13%. Only four analysts cover it (three strong buys and 1 hold) and give a five year EPS growth rate of 15% with a median price target of $30.00.
Is the answer to your problems in a bottle?
National Beverage manufactures and distributes soft drinks, waters, juices, energy drinks and shots, sport drinks and teas and lemonades under various brands. They're not well-known brands like those of much larger rivals Coca-Cola, Pepsico, and Dr Pepper Snapple, although you may have heard of Shasta and Faygo. Its trailing P/E and P/S are lower than these competitors at 14.68 and 1.03.
The price target is $16.75 for 12% upside. National Beverage is a trade down name with the motto of its Big Shot soda,"Even if you don't have a million bucks, let people know you're a big shot." National Beverage has to fight for shelf space but with its 12 strategically located US manufacturing facilities and lean workforce of 1,200 it is still the fourth largest soda company in the US.
The company reported on March 7 that revenues for the trailing nine months were up 6.6% to $494 million, net income grew 7.3% to $34.8 million, and EPS grew 7.1% to $0.75.
Its energy drink may not have the alcoholic kick of Vitameatavegamin but their energy drink Rip It volume gains were up double digits as were those of LaCroix water. Their special dividends also have a kick and have totaled $8.66 per share since 2004, the last of $2.55 a share in December.
Caveat: the company borrowed $60 million to pay it and as Fellow Fool Dan Caplinger wrote, " Much of the benefit went to CEO Nick Caporella, who directly or indirectly owns 74% of the company's shares, and therefore reaped roughly $87 million from the special dividend."
At a market cap of $680 million it's frequently bandied about as a takeover target. It could be a good match for Dr. Pepper Snapple.
So tasty, too
Seneca Foods is the smallest of these at a $362 million market cap. The stock has more than doubled since its $16 low in 2009. It's up 46% in the last year.
It is a food processor and distributor of fruits and vegetables and its best known brands are Stokely's, Seneca, and Libbys. Only 9% of sales come from its proprietary brands, 55% from private label, 23% to institutional foodservice, and the rest for processing Green Giant for General Mills under an alliance agreement. Its main competitors are Fresh Del Monte Produce, Pinnacle Foods, and Dole Foods.
At a trailing P/E of 11.01 Seneca Foods is certainly outperforming Dole with its negative EPS of $2.57. Seneca Foods reminds me of a wannabe B&G Foods having purchased a small fruit processor, Independent Foods, in January. It has an insider hold of 18.67%.
In January institutions sold over 11% of shares possibly on valuation concerns after that run up from $21.00 in June to $30.00 by January. EPS growth rate for the last five years has been a listless -6.40% but in 2012 earnings grew from -$0.17 to $1.32 by year end and that same period revenues grew from $271 million to $452 million.
In the last year the company has been introducing new products such as oatmeal with fruit, fruit in glass, and single serve fruits in plastic cups as canned fruit consumption declines as mentioned in the 2012 annual report. Note: the annual report states it does not hedge or use derivatives to manage interest rate or commodity risks.
Will you join the thousands of happy, peppy investors?
Calavo Growers is my favorite to pep up a pooped portfolio with that yield and the almost insatiable demand for their salsa and avocado products. Its performance as seen on the chart is amazing. National Beverage is interesting as a possible takeout and for its special dividends. Seneca Foods has the lowest P/E, but has really run so wait for a sale.
The best investing approach is to choose great companies and stick with them for the long term. The Motley Fool's free report "3 Stocks That Will Help You Retire Rich" names stocks that could help you build long-term wealth and retire well, along with some winning wealth-building strategies that every investor should be aware of. Click here now to keep reading.
AnnaLisa Kraft has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. 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!