Big Food, Little Food
Kevin is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
No matter what the stock market does or what the economy, even the global one, does there are certain things that have potential and appeal. Looking at the basic human needs of food, water and shelter opens the door to investment strategies. Regardless of what sectors are doing well, it is given that something is providing a dividend or doing well in the areas of food, water and shelter. Yes the housing bubble burst in a catastrophic and economically damaging way, but ultimately it opened up possibilities for investors to profit from the rental market.
This brings us to a beloved necessity of human existence- food. The cap range for food is quite varied as there are massive multi-national entities like Dole (NYSE: DOLE) all the way down to small caps you are more than likely unaware of.
Adding food stocks to your portfolio makes sense because these stocks are pieces of companies that provide goods that are the basics of life itself. That doesn’t mean every food related stock is a winner, it just means that some exposure to food stocks is a wise move as the basic goods involved will always be needed.
Starting off with big food companies there’s Sysco Corp. (NYSE: SYY) a major player in the food-away-from-home industry and supplies just about any place one could get a meal that isn’t a private residence. With many subsidiaries, Sysco supplies about 400,000 customers, has a cap of over $17 billion and a P/E of 14 making it reasonably priced. Sysco Corp. is a five star stock at the Fool with overwhelming bullish support and 3.6% dividend as the most recent yield. If SYY takes a big hit, most of us may be eating at home for quite some time.
Core-Mark Holding Company, Inc. (NASDAQ: CORE) is much smaller than a titan like Sysco and has a cap of about $520 million. Core-Mark is in the business of distribution to convenience stores as well as providing other services like marketing and logistics. Customers are located in the U.S. CORE is a reasonably priced stock with a P/E of 16 although the valuation's close to the high-end of the 52-week range. The Q2 report for Core-Mark Holding had an EPS that was $0.17 below expectations and revenues were about $70 million below the mark despite showing a 12% year to year increase. The EPS is solid and the revenue is growing so “misses” in analyst expectations shouldn’t be too concerning. Most folks on the street give the stock a target of $54 as compared to the current price of $45.
Getting even smaller here (like Steve Martin) is Nash-Finch Company (NASDAQ: NAFC) with a cap of about $231 million. NAFC is losing money and sits at the bottom of the 52-week valuation range. Nash-Finch only gets two stars at the Fool, but I believe there is potential for a rebound. Year to year revenue is down about .6%, but the recent EPS was $0.10 higher than expected.
Another smaller player (but not an easily manipulated penny stock-type) is The Chefs’ Warehouse (NASDAQ: CHEF). With a cap of about $326 million, it is rather small compared to a giant like Nestle. This company went public about a year ago and the valuation went up to $26 and then came down to the current price of around $15, just about where it started. Chefs' recently purchased the Ohio meat and seafood company and appears to have a growth through acquisitions strategy. The forward P/E is about half of the current P/E, but doesn’t take into account the new acquisition. Chefs' Warehouse doesn’t have the best analyst sentiment, so consider it a risky choice with the potential for a noticeable valuation gain.
When looking at basic goods for investing, check out the whole range of company sizes for a nice portfolio mix. Invest wisely, invest boldly and make money, capitalism wants you to.
thedeswolf has no positions in the stocks mentioned above. The Motley Fool has no positions in the stocks mentioned above. Motley Fool newsletter services recommend Sysco . 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.If you have questions about this post or the Fool’s blog network, click here for information.