Commodity costs have hurt a number of the major meat producers, thanks to warmer-than-expected weather and drought conditions. This pressure could well continue over the interim. Since the spin-off, Hillshire Brands Co (NYSE:HSH) is looking to undertake various cost reductions. Back in May, the company invested upwards of $100 million for cost cutting, and expects to save $80 million annually between fiscal year 2013 and 2016.
However, from a valuation standpoint, Hillshire Brands Co (NYSE:HSH) appears to be a bit expensive. Hillshire trades at 55 times earnings, while peers Bridgford Foods Corporation (NASDAQ:BRID) and Tyson Foods, Inc. (NYSE:TSN) are at 17 times. With this high P/E ratio and only a mediocre expected EPS growth rate, Hillshire has a high PEG ratio at 2.2.
At the end of the first quarter, there were a total of 32 hedge funds long the stock. Richard Perry’s Perry Capital has the largest position in Hillshire Brands Co (NYSE:HSH), worth $203 million and comprising 6.5% of its 13F portfolio. Sitting in the second spot is billionaire Ken Griffin of Citadel Investment Group with a $120 million position (check out Griffin’s newest picks).