Round 2 elimination

 

On the elements of volume, dividends, and PE ratios, I have now assigned the ‘undecideds’ to either ‘on the list’ or ‘eliminated’.

The PE ratio average for this industry seems to be around 25.  The majority of them are in the range of the teens through the thirties, so I am considering anything in that range acceptable.   Stocks like BDBD (Boulder Brands, which never made it onto my original list) would be cause for concern at 98.83, as would Dean Foods (already eliminated in first round) at 4.05.    BNNY (Annie’s) is on the high side at 52.39, but since the stock price is going down, the PE will as well – therefore I’m going to wait and see how low it goes during this study.

 

ANFI (Amira Nature Foods) stays on the list.   The more I read about them, the more I like it.

CUSI (Cuisine Solutions) is eliminated based on volume.  Trade volume is approximately 505 shares sold per day, and for a lower priced stock, it means it may be difficult to find a buyer in the event that I wanted to sell it.

GIS (General Mills) stays on the list, mostly due to its high dividend.   At 3.15%, it’s one of the highest in the industry.

GUZBY (Grupo Herdez) is eliminated, also due to volume.   Well under 1000 shares per day are being sold, and I think it’s a bit too risky.   It’s unfortunate, as they seem to be growing.  Just yesterday I saw some Herdez branded frozen dinners in the grocery store, which I had never seen before.

KRFT (Kraft) stays on the list, also due to a high dividend of 3.97%.   This is the highest dividend of all the stocks mentioned on this blog.

MDLZ (Mondelez) stays on the list – it has a (smaller) dividend, volume and PE are fine.

MED (Medifast) is eliminated – this decision didn’t have anything to do with PE, dividends, or volume, but more to do with poor performance in 2013 and negative outlooks from experts.

MGPI (MGP Ingredients) is eliminated due to difficulty in finding information.   Because it is not a consumer brand, but rather a company that supplies ingredients to other companies, it’s much harder to track.

OME (Omega Protein) stays on the list.  Its PE ratio is on the low end (11.03%).

STKL (SunOpta) and TOF (Tofutti) stay on the list as well.  There are no PE ratios on these two since they are presently negative on income, but from looking at the reports, their losses are getting smaller with every quarter that passes.

TR (Tootsie Roll) is eliminated.   Although the volume and PE were fine, I don’t see anything beneficial to this stock over RMCF (Rocky Mountain Chocolate).   TR is priced higher and offers a lower dividend than RMCF.

UN (Unilever) stays on the list.  It also carries a fairly high dividend of 3.65%.

The updated list:

ANFI – Amira Nature Foods

BNNY – Annie’s

CAG – ConAgra Foods

CVGW – Calavo Growers

FLO – Flowers Foods

GIS – General Mills

GRBMF – Grupo Bimbo

HSH – Hillshire Brands

JBSS – John B SanFilippo & Son

JMBA – Jamba Inc

JVA – Coffee Holding CO

K – Kellogg Co

KRFT – Kraft

LNCE – Snyders-Lance

LWAY – Lifeway Foods

MDLZ – Mondelez

NUTR – Nutriceutical

OME – Omega Protein

PF – Pinnacle Foods

PPC – Pilgrim’s Pride

RIBT – RiceBran Technologies

RMCF – Rocky Mountain Chocolate Factory

SENEA – Seneca Foods

SNAK – Inventure Foods

STKL – SunOpta

TOF – Tofutti Brands

TSN – Tyson Foods

UN – Unilever

WILC – G Willi-Foods

WWAV – Whitewave Foods Co.

This is still way too many, with 30 on the list.

Four of the stocks from this list – Grupo Bimbo, Coffee Holding Co, RiceBran Technologies and Tofutti Brands – are low priced stock and really belong on a separate list.   These would not be a primary stock purchase, but a possible buy in conjunction with a more major stock.

If I were to buy, say, 100 shares of Kraft at $54.76 per share (spending $5476.00), I probably wouldn’t want to spend any more on low priced stocks – but if I bought 250 shares of Rocky Mountain Chocolate at $11.65 per share (spending $2912.50), I might also buy some shares of a lower priced stock.

For the next round, I am going to dig into the SEC filings a bit more, specifically looking at net earnings and how they compare to previous reports.

At this stage, I was also going to check the current values of each stock to see how they have fared in the week since I started this blog, but with the recent market downturn, the results aren’t really going to reflect sentiment on the individual companies.

My plan is to narrow my primary list (not including the low priced stocks) down to 10, but it may take a few days.  The market seems to have come back up a bit today so I’m hoping it will settle.

 

P/E, dividends, and more…

Ok, just read up on the P/E ratio.   It makes a little more sense now.

P/E stands for Price/Earnings and it is a comparison tool for stock price (per share), which is based on perception, and actual company earnings price (per share), which is actual.

From what I’ve read, the P/E is a prediction of sorts, of how much profit investors expect the company to earn… I think.  In any case, it seems that the industry average is the best comparison tool.   Near the average would appear ideal.

But as always, it’s not that simple.

Some say that a low P/E means that the company is undervalued, meaning the stock prices SHOULD be higher than they are, so it’s a good buy.   Others would say that a low P/E is a red flag, because investors aren’t willing to pay the actual value of a share, possibly because of something negative within the company’s reports.

Likewise, some say that a high P/E means the stocks are overvalued, thus will come back down to where they should be – others say it means investors are willing to pay more than actual value for the stock because of a positive outlook for the future.

Still others say P/E doesn’t matter.

Now, on to dividends:

The pros:  Ability to make money without selling (since a paid dividend is not susceptible to market fluctuations, it’s yours.), it can help make up for downturns in the market so you’re not out so much

The cons: A high dividend can indicate trouble – dividends go up as stock prices go down.   DIvidends are a more conservative feature and you’d need a lot of stock to make a decent dividend return.   Most volatile companies (with potential for rapid growth/decline) do not offer dividends.   Dividends are taxable as regular income.

Ex-dividend specifies a date in which the dividend no longer applies to purchases made from that date on.

Now, on to volume:

The volume is an indicator of how many shares have been sold within a specified period of time (daily volume, yearly volume, etc).   Volume is not a big indicator of how a stock will perform, unless it is extremely low.   It seems the threshold for extremely low is 1000 or less per day.   This means that it is not a very active stock and it may be difficult to sell.   The last thing one would want is to see a great opportunity to sell, but be unable to find a buyer.  A high volume means that it won’t be hard to sell at market value.

ADR’s (foreign stocks)

I stand corrected.  I previously thought I’d understood that purchasing an ADR (a foreign exchange’s stock also listed on a US exchange) did not carry a currency risk.   I see now that it does.  Apparently I’m not the only one who has misunderstood that, though.  It seems to be a common misconception.

And now a quick lesson on over the counter trading:

OTC:BB – Over the counter (bulletin board) is typically used by smaller companies who do not meet the requirements to be traded on one of the larger national exchanges.   These companies are still required to provide SEC filings.   Companies who are in financial trouble and have been delisted from a major exchange can be found here, as can a new player who is testing the waters before listing on a major exchange.  This can be a starting point of sorts.

OTC:Pink is a different set-up.  These companies are not required to file anything with the SEC and there really is no oversight.  Companies on OTC:Pink are generally very small or do not want to make their financials public.  This is the riskier of the two due to the large number of penny stocks and the ability to manipulate stock prices via anonymous message board tips, etc.   It’s worth noting that large foreign companies like Nestle and Nissan trade on OTC:Pink.

So next I’m going to analyze these items with regard to my “Undecided” list.

First Round Elimination

 

Ok, so my first round of basic research is complete.  Based on what I’ve researched so far, I’ve pretty much eliminated the following stocks from my list of possibles.  This isn’t to say that changes in the market won’t make me rethink them, but based on my sentiment now:

CPB – Campbells Soup Co:  Higher priced stock, conservative, no major signs of an upcoming rise, would prefer a lower price (more shares) for a conservative stock.

DF – Dean Foods:  Has dropped by 50% in 2013, and still remains low.  Recent earnings disappointments, a pending lawsuit, and lack of enthusiasm from experts contribute to its elimination from my list.

FARM – Farmer Brothers: ‘Buy high’, questionable 2013 earnings fueled by one-time sales (such as real estate), and pessimism from experts.

GLDC – Golden Enterprises: Not enough information to make an educated decision on this low priced stock.  Would require more research than I am willing to do for a stock that I don’t already consider a good one.

GMK – Gruma SAB de CV: ‘Buy high’, Mexican stock and may be subject to currency fluctuation, in similar position to Amira (Indian company), with Amira having the edge with its recent acquisition.  Can’t see any reason to pick this one over Amira.

HRL – Hormel: Higher priced stock, ‘buy high’, with no obvious signs of it continuing to go up significantly.

I am not going to research my eliminated stocks any further at this time, but I will continue to track their progress once a week or so.   If there are any significant changes that warrant it, I will change them to Undecided or add them back to my list.

 

The following are my Undecideds.   My goal with these in my ‘Round 2′ of research is to dig a little deeper to either add them to my list or eliminate them.  By the time I finish this round of research, there should be no more Undecideds.

ANFI – Amira Nature Foods:  Pros: Large acquisition that should benefit company, lower priced stock, uptrend  Cons: Buy high, portion of 2013 revenue from sale of commodities and not from their rice products

CUSI – Cuisine Solutions: Pros: Stable company in business since 1974, low priced stock, expansion to include bison products  Cons: over the counter, was once on AMEX and delisted, product only sold in bulk and expensive for the everyday consumer

GIS – General Mills: Pros: starting to release GMO free products, lowest price of the big 3 cereal makers, experts strongly rating a buy, not a ‘buy high’   Cons: higher priced stock (especially for a conservative stock), trends seem to be short lived

GUZBY – Grupo Herdez:  Pros: large company, emerging market (Mexico), company has US presence, lower priced stock  Cons: Mexican market and possibly subject to currency fluctuations, not much information available, less than $3 difference from 52 week low to 52 week high, may indicate very few traders

MDLZ – Mondelez: Pros: Some optimism from experts, possible spinoff of Pepsi products in future, fairly conservative  Cons: ‘Buy High’, some pessimism from experts, currently on a downtrend

MED – Medifast: Pros: Expansion, introduction of new entrees, named 3rd most popular diet, ‘buy low’, possible uptrend  Cons: poor 2013 performance without explanation, being rated a hold by experts

MGPI – MGP Ingredients: Pros: Low priced stock, on an upward trend after a decline, experts opinions mixed, lots of room to move up in the industry.  Cons: no brand recognition, shortage of headlines/news, mixed opinions from experts, somewhat a ‘buy high’.

OME – Omega Protein: Pros: low priced stock, positive expert ratings, near middle of its 52 week range, healthy product.   Cons: 52 week high was only a brief spike, on a downtrend, shutting down a facility and retiring a few fishing vessels

KRFT: Kraft Foods:  Pros: One of the most well-known in the industry, center of its 52 week range, on an uptrend, expert ratings good  Cons: High priced stock, articles indicating underperformance, not many headlines or indicators that it will continue to go up

STKL – SunOpta: Pros: Low priced stock, health food/nutrition company, rated as a buy and mentioned as a top pick by experts, at about the center of its 52 week range.  Cons: part of its income comes from mineral and biofuel subsidiaries which means more markets to track, plummeted in November with no obvious reason.

TOF – Tofutti Brands: Pros: Low priced stock, health food, upward trend  Cons: Lost Trader Joes as a carrier of its products, near its 52 week high

TR – Tootsie Roll: Pros: Middle of its 52 week range.  Cons: currently on a downtrend, experts leaning toward sell, not much news available

UN – Unilever: Pros: Down since early 2013, near its 52 week low, good buy once it stars to climb.   Cons: recent union strike at South Africa facility affected production, negative articles regarding sales growth, experts rating it a hold

This leaves the following on the list:

BNNY – Annie’s

CAG – ConAgra Foods

CVGW – Calavo Growers

FLO – Flowers Foods

GRBMF – Grupo Bimbo

HSH – Hillshire Brands

JBSS – John B SanFilippo & Son

JMBA – Jamba Inc

JVA – Coffee Holding CO

K – Kellogg Co

LNCE – Snyders-Lance

LWAY – Lifeway Foods

NUTR – Nutriceutical

PF – Pinnacle Foods

PPC – Pilgrim’s Pride

RIBT – RiceBran Technologies

RMCF – Rocky Mountain Chocolate Factory

SENEA – Seneca Foods

SNAK – Inventure Foods

TSN – Tyson Foods

WILC – G Willi-Foods

WWAV – Whitewave Foods Co.

I’m going to work on the Undecideds next, either putting them on the list or eliminating them.

To do this, I’m going to research dividends, volume, PE ratios, and read the discussion parts of the earnings reports.  I’m also going to look at each company’s website and do a more focused search (previously I was only looking at 1-2 stock related websites for headlines) for news items.   Lastly, I will read more about the implications of foreign based stocks.

I won’t be delving too deeply into the earnings report data until near end of the process – as I want to minimize how many I need to read/try to make sense of.

Before I close this entry, I want to add an honorable mention for DMND – Diamond Foods.   You could say it’s eliminated for now, but I want to treat it like it’s on the list, because I want to understand why the recent lawsuit did not cause any decline in its stock.  (Settlement dictates they pay $5 million)  It seems there were actually 6 legal proceedings against them in the last year, all related to misleading information regarding their operations and earnings reports… yet the stock continued to climb through it all.

 

WWAV – Whitewave Foods Co

Whitewave Foods currently trades at $23.88.  It’s consistenly risen since early 2013, and is near its high of $24.96.  Its low of $14.67 occurred in February 2013.

They have just acquired Earthbound Farms, and are in the process of partnering with Dunkin Donuts to produce DD coffee creamers.

Its ratings are a mix of buy and hold.

It’s a ‘buy high and hope to sell higher’ and the acquisition of Earthbound Farms was recent, but long enough ago that any impact would have likely been seen already.

There’s a lot of positive speculation on this stock, seen on Zack’s and Benzinga, which is keeping it on my list.

WILC – G Willi Food International

 

G Willi-Food is an international food importer.   They market and distribute over 600 foods worldwide, mostly under the Willi-Foods brand.

It currently trades at $8.32, with a January 2013 low of $5.25 and a recent high of $8.91.  It has gone up consistently all year.

The most recent headline indicates a 17% earnings increase in 2013 over 2012.    Its 3rd quarter earnings were positive too, a 36% increase over its 3rd quarter of 2012.

It’s rated a buy unanimously, and although it’s a ‘buy high, hope to sell higher’, the stock price is low for the industry, so I think it still has some room to move.

This one stays on the list.

 

UN – Unilever

 

Unilever is another conservative stock that has a high-low range of less than $10.00.   Its low of $36.95 occurred in October 2013, and its high of $42.99 occurred in May 2013.

It had a decent run from March to June, but has been up and down since, and its down from the start of 2013, which is unusual for this industry.

There are several headlines that explain the poor performance, the most recent from January 24, 2014, telling of a union strike against their plant in South Africa, which has affected production.

Weak 4th quarter earnings were reported a few days ago, and phrases like “Sales Growth Slows” and “No respite in sight” jumped out at me from other headlines.

It’s being rated a hold unanimously.   Because of its position on the chart, I’m not ruling it out, but I think it’s a ‘wait and see’ that may be good to jump on when some good news surfaces.

Undecided for now.

TSN – Tyson Foods

 

Tyson is currently trading at $34.77, very near its 52 week high of $35.74.   This definitely qualifies as “buy high, hope to sell higher”.    It has consistently risen all year from its low of $21.79.

The question now, is whether there is any reason to think it will continue to rise.  There are a couple things that may indicate that.

It has recently announced the acquisition of Bosco’s pizza.   It is considering making an offer for Michael Foods.

Some experts are saying buy, others are saying hold.  Nobody is saying sell.

This one stays on the list.

 

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