Cal-Maine Foods Inc (CALM), B&G Foods, Inc. (BGS): Panning for Solid Gold Pantry Stocks

Page 1 of 2

Using a stock screener is a lot like panning for gold. After screening over 4,000 food and beverage stocks on criteria of a minimum four star CAPS rating, yield over 2.5%, and Wall Street outperforms, three names come up shining: Cal-Maine Foods Inc (NASDAQ:CALM) , B&G Foods, Inc. (NYSE:BGS) and Pinnacle Foods Inc (NYSE:PF). I was fully expecting to see names like General Mills, Inc. (NYSE:GIS) or McCormick & Company, Incorporated (NYSE:MKC).

Cal-Maine Foods Inc (NASDAQ:CALM)

Defensives have run like rabbits as investors seek protection from a market correction. Maybe with extended P/Es after so much market love that’s why big caps PepsiCo, Inc. (NYSE:PEP), Campbell Soup Company (NYSE:CPB), Kellogg Company (NYSE:K), and The J.M. Smucker Company (NYSE:SJM) didn’t make the screen.

Panning for Pinnacle

The three that came through are small to mid-caps with B&G Foods, Inc. (NYSE:BGS) a direct rival to Pinnacle Foods Inc (NYSE:PF). Pinnacle only debuted on March 28 to much fanfare for a canned and frozen food stock. You’re probably familiar with its products, found in 85% of US households. Their leadership brands are Mrs. Butterworth’s syrup, Vlasic pickles, Duncan Hines, and Aunt Jemima.

Pinnacle Foods Inc (NYSE:PF)’s trailing P/E is a pricey 41.74 and the forward P/E is 15.34. This one may only be gold plated as that P/E shouldn’t have made it through the screen. Also, the stock has run 15% since its IPO when it opened at $22.15.

However, as promised, the company plans to pay a dividend with a 3% yield with some of the IPO proceeds as well as paying down debt. And it has a lot of debt, $1.8 billion remaining after the $580 million proceeds when Blackstone took them public. Blackstone still owns 70% of the common stock.

Analysts expect 8.50% revenue growth for the next year with 2013 revenues of $2.45 billion and $2.52 billion in 2014. Stifel Nicolaus initiated coverage with a Buy on May 6. The median price target is $27.00 which doesn’t leave much room for upside having closed at $25.46 on May 17. Trading at 1.15 price/sales, Pinnacle is lower than the industry’s 1.74 and with a1.39 PEG, compared to General Mills, Inc. (NYSE:GIS) at 2.41, it’s not a terrible value but that debt load is hard to swallow.

The company has grown in the past by acquisition, acquiring Birds Eye Frozen Foods and Armour canned meats. Its targets are usually unloved underperformers which it then gives a makeover and some marketing support.

Feisty and growing

That model is identical to B&G Foods, Inc. (NYSE:BGS), a better stock in my opinion, with a 3.80% yield and a five star CAPS rating. It has built an impressive roster of brands, just on May 7 acquiring True North nut snacks from DeMet’s for an undisclosed sum. Other brands you likely have in your pantry are their Ortega tacos and salsas or some of its other 30 brands like Polaner spreads and Cream of Wheat.

It’s beginning to extend into personal care having acquired Culver Specialty brands (hair and body care) from Unilever N.V. (ADR) (NYSE:UN) and so will have another big cap rival, Procter & Gamble, besides other big cap food conglomerates like Mondelez International, The J.M. Smucker Company (NYSE:SJM), and PepsiCo, Inc. (NYSE:PEP) for its food division.

Their model, like Pinnacle Foods Inc (NYSE:PF), is to take downtrodden food companies, under $100 million, and spiff them up and promote them heavily. Case in point is Cream of Wheat which they bought and added Cinnabon and chocolate varieties and promoted with coupons and social media. Also, brands they acquire are shelf-stable (an advantage over Pinnacle Foods Inc (NYSE:PF)) and expected to be immediately accretive or no sale.

Page 1 of 2
Comments
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months. Our beta is only 1.2 (don't click this link if beating the market isn't important to you).

Lists

Richest Doctors in the World

The Best Movie Sountracks Ever

The Highest Grossing Musicals on Broadway

The Most Successful Reality TV Stars

Cheapest Cities to Visit in the US

Most Expensive Summer Camps

Most Expensive Animals in the World

Most Expensive Specialty Crops in the World

Movies That Took Ages to Make

The Longest Hollywood Films Ever Made

Most Expensive Concert Stages

The Richest Bands of all Time

10 Most Corrupt Countries 2013 List

10 Countries with the Highest Quality of Life Index

Most Expensive Mattresses in the World

5 Smallest Countries by Land Area

The Ultimate Heartbreak Songs

Richest Teenagers in the World

10 Most Haunted Places in America

10 Best Places to Retire in Florida East Coast

Top 10 Places to See Before You Die

Top 8 Countries in the World Where Justice Prevails

10 Richest States in America

15 Wealthiest Countries in the World

Richest Singers in the World

Most Expensive Tasting Menu in New York City

Most Expensive Baby Items in the World

Most Expensive Hotel Suites in Vegas

Most Expensive Brunch in New York City

Most Expensive Beef Cuts in the World

25 Best Colleges to Get a Job

Top 10 US Supermarkets

The 25 Most Dangerous Cities in the World to Visit

Most Expensive Xbox Games

Top 11 Cities Where Billionaires Live

Top 10 Most Charitable Companies in America

Most Expensive Seafood in the World

The 10 Wildest Conspiracy Theories

The 10 Best Job Markets in the US

Top 10 Accounting Scandals of All Time

The 25 Biggest Cities in the World

Top 10 Best Paying Virtual Jobs

Most Expensive Leather Shoes in the World

Top 6 Things to Buy in March

The 10 Most Stressful Jobs in America – 2014 List

Top 10 Jobs for Introverted People

Top 10 Honeymoon Destinations in the World

Top 10 Highest Paying Jobs in the World

Most Expensive Day-Care in New York City

The 10 Cheapest Places to Retire Abroad

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!