Meryl Witmer is a general partner at Eagle Capital in New York, and is one of GuruFocus’ newest gurus. Witmer focuses on companies trading at low prices, with strong prospects, above par management teams and an abundance of cash flow. The following two companies are a highlight of Witmer’s stock picks for the year ahead.
Both companies produce ingredients, mainly sweeteners and starch, used in the food, beverage, and brewing industries. They also sell to the paper, personal-care, pharmaceutical, textile, and animal-feed industries.
“Ingredion has relatively steady earnings in its bulk business, because it hedges its corn purchases. Over time, it can pass on raw-material price changes to customers.” – Witmer
At the time of her Barron’s interview Ingredion was trading at $67.11, and the stock is now trading significantly up to $76.13 per share. In her interview Witmer says she favors Ingredion because it focuses on specialty application instead of a broader baseline like its competitors. Witmer says that the company could earn at least $5.37 per share in 2015.
Some more financials she highlights are that she and her fund (Eagle Capital Management) have a one-year target price of $95 to $100 a share. The company has $7 a share of gross cash and an interest coverage of more than ten times.
Specializing in nature-based sweeteners, starches and nutrition ingredients, Ingredion is a leading global ingredients solutions provider. The company specializes in ingredients found in products that people around the world use every day - from soft drinks, salad dressings, and beer to health foods, paperboard, cosmetics, agri-products, and pet food.
Ingredion’s historical revenue and net income:
The analysis on Ingredion reports that the company’s operating margin is expanding, its revenue per share has been in decline over the past year and its price is trading at near a 10-year high.
The company recently announced that they would be releasing their 2014 second quarter holdings on July 30, 2014 prior to market open.
The Peter Lynch Chart suggests that the company is currently overvalued:
Witmer is not the only guru with her eyes on Ingredion. There are ten other gurus that hold a position in the company’s stock. You can check out their holding histories here.
Ingredion has a market cap of $5.68 billion. Its shares are currently trading at around $76.3 with a P/E ratio of 16.50, a P/S ratio of 0.90 and a P/B ratio of 2.40. The dividend yield of the company’s stocks is at 2.10% and it had an annual average earnings growth of 12.80% over the past ten years.
GuruFocus rated Ingredion the business predictability rank of 4-star.
Tate & Lyle (LSE:TATE)
“Tate & Lyle is based in the U.K. Its business and portfolio are similar to Ingredion's, but Tate also produces Splenda Sucralose, a zero-calorie sweetener.” - Witmer
Guru Meryl Witmer’s second stock pick was in Tate & Lyle which is also in the ingredients and solutions sector of the market. At the time of the Barron’s article Tate & Lyle was trading at 690 pence.
Witmer favors this company for its growth potential. She said that the company could possibly grow 56 pence, or $0.94, of free cash flow by the year end March 2015, and by fiscal 2016 the FCF could be at 59 pence. The guru also believes that “Tate has a solid management team and a conservative balance sheet.”
Not only does Witmer like the looks of the balance sheet, she also acknowledges the fact that they also hold a pretty sweet dividend of 4%. Tate & Lyle’s dividend history is as follows:
- 10-year: 5.60%
- 5-year: 5.10%
- 3-year: 4.00%
- 1-year: 3.60%
Tate & Lyle PLC provides ingredients and solutions to the food, beverage and other industries. The company offers starch-based ingredients, comprising fat-replacers, specialty sweeteners and corn fibers.
Tate & Lyle’s historical revenue and net income:
The analysis on Tate & Lyle reports that the company’s revenue per share has been in decline over the past year, its Piotroski F-Score is high and its dividend yield is near a 3-year high.
The Peter Lynch Chart suggests that the company is currently undervalued:
Tate & Lyle has a market cap of £3.07 billion. Its shares are currently trading at around £6.50 with a P/E ratio of 11.30 and a P/S ratio of 0.98. The dividend yield of Tate & Lyle is at 4.20% and the company had an annual average earnings growth of 3.70% over the past ten years.
You can read the full Barron’s Midyear Roundtable here. Also check out more of Witmer’s stock picks and her most updated portfolio here.