Here’s Why LVS Advisory Sold Seneca Foods Corporation (SENEA)?
LVS Advisory, a New York City-based full-service investment firm, recently released its third-quarter 2023 investor letter. A copy of the same can be downloaded here. The defensive portfolio of the fund gained 4.4% (net of all fees and expenses) for the nine months ended 2023 compared to a 5.0% gain for its benchmark High-Yield Bond Index. On the other hand, its Growth Portfolio returned (2.4%) year to date compared to a 13.1% return for its benchmark, S&P 500 Total Return Index. For more information on the fund’s top picks in 2023, please check its top five holdings.
LVS Advisory highlighted stocks like Seneca Foods Corporation (NASDAQ:SENEA) in the third quarter 2023 investor letter. Headquartered in Fairport, New York, Seneca Foods Corporation (NASDAQ:SENEA) offers packaged fruits and vegetables. On October 18, 2023, Seneca Foods Corporation (NASDAQ:SENEA) stock closed at $54.92 per share. One-month return of Seneca Foods Corporation (NASDAQ:SENEA) was 1.52%, and its shares lost 5.39% of their value over the last 52 weeks. Seneca Foods Corporation (NASDAQ:SENEA) has a market capitalization of $413.817 million.
LVS Advisory made the following comment about Seneca Foods Corporation (NASDAQ:SENEA) in its Q3 2023 investor letter:
"Seneca Foods Corporation (NASDAQ:SENEA) is a consumer-packaged goods company that sells canned vegetables in the US. The opportunity to buy the stock came when it was removed from the S&P 600 index at the end of June. The stock declined by over 25% within a few weeks as many funds that track the S&P 600 became forced sellers.
In addition to the index deletion, the company took a massive LIFO accounting charge obscuring the company’s reported earnings. The accounting charge relates to how Seneca values its inventory which it has historically done on a “last in, first out” basis. After adjusting for this non-cash accounting charge, Seneca’s stock was trading for just 4x cash flow and less than 1/3 of its book value. I viewed this as an extremely attractive valuation for an otherwise staid business. We purchased shares of SENEA stock in July for approximately $36.50 per share.
What happened next was equally impressive. Other participants in the market started to catch on to the value offered by Seneca. The company reported solid financial results in August and the stock quickly caught a bid. Within a month, the stock rallied 40% and we were able to sell our shares in August at a price of around $51 per share.
Seneca isn’t a bad business, but it isn’t a super high-quality business either; therefore, the plan was always to sell the stock once it appreciated back to its fair value range. The stock reverted back to the level it traded at before the index deletion, so I felt that the event-driven thesis had played out and it was time to take profits and move on."
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Seneca Foods Corporation (NASDAQ:SENEA) is not on our list of 30 Most Popular Stocks Among Hedge Funds. As per our database, 10 hedge fund portfolios held Seneca Foods Corporation (NASDAQ:SENEA) at the end of second quarter which was 8 in the previous quarter. In addition, please check out our hedge fund investor letters Q3 2023 page for more investor letters from hedge funds and other leading investors.
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Disclosure: None. This article is originally published at Insider Monkey.
