As an investor, you could've done a lot worse than own J.M. Smucker (SJM) over the past decade or so.
Members of the media and retail investors tend to focus on a handful of stocks, techs like Apple (AAPL) and financials such as Citigroup (C), but when you look at the performance of a Smucker, you start to wonder what else we're missing. This is a household name, hiding in plain sight, that's been a money machine for stockholders.Go back to 2000, and the stock is up 300%, Yahoo! Finance data show. That's not even close to making it the best S&P 500 stock, which would be Monster Beverage (MNST). Still, it's in the top 20% of the index's individual performers, and the beta is half of what the market's is, meaning it's much less volatile than the S&P overall.
On Friday, the maker of jelly and Magic Shell saw its shares gain 5% to $82.96 and hit an all-time high above $84 during the session. The advance came after the company released its latest quarterly results, covering the fiscal first quarter of 2013. Sales rose 15% from a year earlier to $1.37 billion. Volume was up 2%, led by Jif peanut butter and Folgers coffee, while earnings, before items, exceeded projections by climbing to $1.17 a share from $1.12.
Since the second quarter of 2006, Smucker has missed profit estimates only four times. Among all the better-than-expected quarters, this was one of the larger percentage beats, coming in 17.3% ahead of the $1 consensus estimate, FactSet indicates. Sales also got past the analyst target of just under $1.3 billion.
All said, it's hard not to be fairly impressed with Smucker. On average, the stock has been up 11.6% a year for the past five years. Thus far in 2012, it's behind the pace, with a gain of 2.2%. Even so, the dividend keeps getting raised, consistently leaving the yield in the 2.5% range and bulking up the total return. Sales have a compound annual growth rate of 20.8%, while EBITDA has a CAGR of 27.5%, almost identical to the growth in net income. Long-term debt has increased, but so has free cash flow, and the debt-to-equity ratio hasn't gotten out of line. Against other food and drink stocks, Smucker's P/E is ahead of ConAgra (CAG), though it's more conservative than Kraft (KFT) and Coca-Cola (KO) (all data are from FactSet).
Now, Smucker isn't without problems. For instance, in February, it cut its outlook. But since then, the stock is up 10.3%. The company offered a weaker-than-hoped forecast again in June, but the shares have gained 3.8% in the last two months. For now, the view has stabilized, with management affirming that for the current fiscal year, net sales should rise about 7%. Earnings before items are seen coming in at $5 to $5.10 a share.
Along with Smucker, a couple of other notables from the food-in-your-pantry department have done awfully well from the start of the 2000s and crushed the flat performance of the Dow and S&P. Nestle (NSRGY) has added 186%, and Hershey's (HSY) has gained 240%.
So what's the takeaway? Pick up a few snack makers, sit back and enjoy the unending gains? Not remotely. Kraft, for instance, is just now getting back to the level it was in mid-2002 after spending most of the past decade in the $20s and $30s. Tootsie Roll (TR) had its best days around 10 years ago. If it were simple as betting on some mass-production food company and calling it a day, we'd all be doing it.
But here is the point. Smucker, a company at the center of the PB&J, has numbers that a lot of firms out there would take right now and keep taking.
When you're doing your homework and looking for investments, remember that. Don't only dwell on the flashy headline names. You needn't go all Peter Lynch with the buying what you know, but don't forget that sometimes it does make sense to look at what's in front of you, whether it's in your PC or in your kitchen cabinet.
- Investment & Company Information