With Thanksgiving once again upon us, investors may want to consider looking at companies that profit from the holiday that brings family and friends together.
According to NCSolutions, total Thanksgiving spending is projected to be about the same as in 2019 despite the Covid-19 pandemic keeping gatherings smaller across the country and pushing prices for some key staples higher.
As of Nov.25, the GuruFocus All-in-One screener, a Premium feature, found packaged foods companies that profit from the annual feast of gratitude include Conagra Brands Inc. (CAG, Financial), Campbell Soup Co. (CPB, Financial), Hormel Foods Corp. (HRL, Financial), The Kraft Heinz Co. (KHC, Financial) and McCormick & Co. Inc. (MKC, Financial).
Conagra Brands
The Chicago-based company, which is known for its Birds Eye frozen vegetables, Reddi Wip and Duncan Hines brands, has a $17.50 billion market cap; its shares were trading around $35.74 on Wednesday with a price-earnings ratio of 17.65, a price-book ratio of 2.15 and a price-sales ratio of 1.55.
With a GF Value of $35.87 and a price-to-GF Value ratio of 1, the stock appears to be fairly valued. The GuruFocus valuation rank of 5 out of 10 also supports this assessment since the share price and price-sales ratio are approaching multiyear highs.
GuruFocus rated Conagra Brands' financial strength 4 out of 10. As a result of the company issuing approximately $3.5 billion in new long-term debt over the past three years, it has low interest coverage. In addition, the Altman Z-Score of 1.84 indicates the company is under some pressure.
Boosted by an expanding operating margin, a good net margin and strong returns, the company's profitability scored a 6 out of 10 rating. In addition, its moderate Piotroski F-Score of 5 implies business conditions are stable. Conagra also has a predictability rank of one out of five stars. According to GuruFocus, companies with this rank typically see their stocks gain an average of 1.1% annually over a 10-year period.
Of the guru invested in Conagra, Jana Partners (Trades, Portfolio) has the largest stake with 2.22% of outstanding shares. The T Rowe Price Equity Income Fund (Trades, Portfolio), Mario Gabelli (Trades, Portfolio), Jim Simons (Trades, Portfolio)' Renaissance Technologies, Pioneer Investments (Trades, Portfolio), Ray Dalio (Trades, Portfolio), Joel Greenblatt (Trades, Portfolio), Steven Cohen (Trades, Portfolio), Paul Tudor Jones (Trades, Portfolio), Jeff Auxier (Trades, Portfolio) and Lee Ainslie (Trades, Portfolio) also have positions in the stock.
Campbell Soup
Headquartered in Camden, New Jersey, the company known for its cream of mushroom soup, a key ingredient in many popular casseroles, has a market cap of $14.79 billion; its shares were trading around $48.92 on Wednesday with a price-earnings ratio of 9.15, a price-book ratio of 5.78 and a price-sales ratio of 1.72.
Based on the GF Value of $50.79 and price-to-GF Value ratio of 0.97 the stock appears to be fairly valued. The GuruFocus valuation rank of 7 out of 10 leans more toward undervaluation, however, since the price-earnings and price-book ratios are close to 10-year lows.
Campbell Soup's financial strength was rated 4 out of 10 by GuruFocus. In addition to a low cash-to-debt ratio of 0.13 and poor interest coverage, the Altman Z-Score of 2.21 warns the company is under some pressure.
The company's profitability fared better, scoring a 7 out of 10 rating despite having a declining margins. Campbell is supported by strong returns that outperform a majority of competitors, a high Piotroski F-Score of 7, which indicates operations are healthy, and a one-star predictability rank.
With 1.19% of outstanding shares, Simons' firm is Campbell's largest guru shareholder. Other top guru investors are Pioneer, Gabelli, Cohen, Ainslie, Greenblatt, John Hussman (Trades, Portfolio) and Jeremy Grantham (Trades, Portfolio).
Hormel Foods
The Austin, Minnestoa-based company, which owns the Jennie-O turkey brand, has a $25.29 billion market cap; its shares were trading around $46.87 on Wednesday with a price-earnings ratio of 27.4, a price-book ratio of 4.03 and a price-sales ratio of 2.65.
Sporting a GF Value of $42.56 and a price-to-GF Value ratio of 1.10, the stock appears to be fairly valued. The GuruFocus valuation rank of 2 out of 10, however, leans more toward overvaluation.
GuruFocus rated Hormel's financial strength 8 out of 10. With a comfortable level of interest coverage and a high cash-to-debt ratio of 1.34, the robust Altman Z-Score of 7.19 indicates the company is in good standing.
The company's profitability fared better, scoring a 7 out of 10 on the back of an expanding operating margin, returns that outperform a majority of industry peers and a moderate Piotroski F-Score of 5. Despite having consistent earnings and revenue growth, Hormel's two-star predictability rank is on watch. GuruFocus says companies with this rank return an average of 6% annually.
Mairs and Power (Trades, Portfolio) is the company's largest guru shareholder with a 0.77% stake. Simons' firm, Pioneer, Dalio, Tom Russo (Trades, Portfolio), Ken Fisher (Trades, Portfolio), Caxton Associates (Trades, Portfolio), Ainslie, Greenblatt and Jones also own Hormel Foods.
Kraft Heinz
The owner of the Oscar Mayer, Kraft, Velveeta, Heinz and Jell-O brands, which is headquartered in Chicago, has a market cap of $39.78 billion; its shares were trading around $32.54 on Wednesday with a price-book ratio of 0.8 and a price-sales ratio of 1.55.
According to the GF Value of $32.60 and the price-to-GF Value ratio of 1, the stock is fairly valued.
Weighed down by weak interest coverage and a low cash-to-debt ratio of 0.1, Kraft Heinz's financial strength was rated 4 out of 10 by GuruFocus. The Altman Z-Score of0.8 also warns the company could be in danger of bankruptcy if it does not improve its liquidity position.
The company's profitability scored a 6 out of 10 rating, driven by an expanding operating margin. Its returns, however, are negative and underperform a majority of competitors. Kraft Heinz also has a moderate Piotroski F-Score of 6, but has recorded a decline in revenue per share over the past five years.
Warren Buffett (Trades, Portfolio) is the company's largest guru shareholder with a 26.63% stake. First Eagle Investment (Trades, Portfolio), Pioneer, Simons' firm, Dalio, Greenblatt, Bruce Berkowitz (Trades, Portfolio), Mark Hillman (Trades, Portfolio) and Gabelli also have notable stakes in Kraft Heinz.
McCormick
The Baltimore-based company, which is known for its spices and seasonings, has a $24.77 billion market cap; its shares were trading around $185.59 on Wednesday with a price-earnings ratio of 32.77, a price-book ratio of 6.28 and a price-sales ratio of 4.53.
With a GF Value of $158.35 and a price-to-GF Value ratio of 1.17, the stock appears to be modestly overvalued. The GuruFocus valuation rank of 1 out of 10 also supports this assessment since the share price, price-earnings ratio and price-sales ratio are approaching 10-year highs.
GuruFocus rated McCormick's financial strength 4 out of 10 on the back of adequate interest coverage and a high Altman Z-Score of 3.27, which indicates the company is in good standing even though assets are building up at a faster rate than revenue is growing.
Boosted by an expanding operating margin, a good net margin and strong returns, the company's profitability scored an 8 out of 10 rating. In addition, McCormick has a high Piotroski F-Score of 8, while consistent earnings and revenue growth contributed to a four-star predictability rank. According to GuruFocus, companies with this rank typically see their stocks gain an average of 9.8% annually.
Of the guru invested in McCormick, Pioneer has the largest holding with 0.21% of outstanding shares. Other top guru shareholders are Cohen, Dalio, Jerome Dodson (Trades, Portfolio), Ainslie, Russo, Greenblatt, Jones, Gabelli, Caxton Associates (Trades, Portfolio) and Mairs and Power (Trades, Portfolio).
Disclosure: No positions.
Read more here:
- David Abrams Drills Into Energy Transfer in 3rd Quarter
- John Paulson Buys Lear, Sells TD Ameritrade
- The Top 5 Trades of Steve Mandel's Lone Pine
Not a Premium Member of GuruFocus? Sign up for a free 7-day trial here.
