The lone active purchase At some point during the fourth quarter of 2011, the Foundation purchased 351,000 shares of embattled food packager Diamond Foods (Nasdaq: DMND), worth roughly $11 million. Because of the way these filings work, it is not possible to tell precisely when buying and selling activity takes place. For Diamond Foods, this is crucial to know because the stock plummeted early in the quarter. The drop was dramatic -- Diamond traded above $90 per share in late September but fell precipitously in November. The stock stabilized a bit in December, settling down around $30 per share.
In what has been a very public implosion, Diamond was riding high and had agreed to acquire the Pringles potato chip brand from consumer products giant Procter & Gamble (NYSE: PG). But shortly after the deal was announced, accounting irregularities surfaced at Diamond surrounding the manner in which it accounted for the purchase of walnuts from its suppliers. There has been speculation it cooked its books to make its numbers look better to P&G in order to seal the Pringles purchase.
Returning to the timing of the Gates purchase, it could very well be that the Foundation chose to go bottom fishing in Diamond's stock. The company still owns a healthy mix of food brands, including Kettle Potato Chips, Pop Secret and Diamond Culinary Nuts. Pringles has since been snapped up by rival Kellogg (NYSE: K), but Diamond still has a solid growth track record and could eventually put its accounting woes behind it. If Gates holds Diamond through the first quarter, or even acquires additional shares, then he'll likely own the stock for the long haul.
Risks to Consider: The jury is still out on the merits of the purchase of Diamond Foods. Therefore, it's wise to research this stock further before you make any decision.
Action to Take --> Ecolab is a great core holding consideration for conservative investors who are focused on the long term.
Shares of Diamond Foods have continued to struggle into 2012, but with any clarity on the accounting woes that won't bring the company to financial ruin, clearly make this a turnaround stock with tons of upside potential. Just a year ago Diamond earned $2.61 per share, and analysts still project $2.78 per share this year. This puts the forward P/E of 8 in value territory.