WhiteWave Foods Co (WWAV), General Mills, Inc. (GIS): Buying a Part of This Food Company May Be Better Than the Whole

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Dean Foods Co (NYSE:DF), the leading U.S. dairy processor and distributor, is a much different type of investment than most food producers. For one thing, the company’s revenue has been somewhat erratic (see chart), but still on a general uptrend. Also, because of the erratic earnings, and the commodity-like nature of its products, the shares are much more volatile than many other food producers.

Stocks like this always catch my eye, as they can be very profitable investments when caught at the right time. However, with shares right at their 52-week high, is now that time, or should investors run screaming for the exits?

About Dean Foods

Dean Foods Co (NYSE:DF), as mentioned, is the leading U.S. dairy producer, with most of its sales coming from the company’s Fresh Dairy Direct segment, which sells refrigerated dairy products directly to stores. Products include milk, ice cream, cheeses, creamers, and other types of dairy products.

In 2012, almost 20% of Dean Foods Co (NYSE:DF)’s sales came from their WhiteWave segment, which they are planning on splitting off. WhiteWave Foods Co (NYSE:WWAV) actually completed an IPO in October of last year, with Dean still holding an 87% stake, which it plans to spin off later this month. Dean plans to retain approximately a 20% holding in WhiteWave after the split.

WhiteWave Foods Co (NYSE:WWAV) makes the popular Silk soy milk, almond and coconut milks, and the Horizon organic line of dairy products. They have actually been one of the most profitable aspects of Dean Foods Co (NYSE:DF)’s business in recent years.

With the growing number of health-conscious consumers, I actually view the loss of WhiteWave Foods Co (NYSE:WWAV) as a major negative for the success of Dean Foods, although current shareholders could certainly benefit from the split for the following reason: Because this is a growing trend, I wouldn’t be surprised if WhiteWave Foods Co (NYSE:WWAV) becomes a takeover target for one of the food giants such as General Mills, Inc. (NYSE:GIS) in order to capitalize on this trend.

As an investment

So, as things stand now, before the spin-off, is Dean Foods Co (NYSE:DF) worth a look. Well, for one, investors will need a strong stomach to ride out the ups and downs in Dean. In terms of historic volatility, which is defined as the average standard deviation from the stock’s average price over the course of one month, the stock comes in at a relatively high 49.2%. In other words, if the stock averaged $18 in an average month, it would trade in a range of between $13.57 and $22.43. Talk about having to time your entry just right!

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