Since 2005, SEB has risen from $1,193 per share to $3,880 per share, an increase of 225%, outpacing both the S&P 500 and BRK.A in the process.
Seaboard Corporation is a holding company with diverse agribusiness and transportation operations worldwide, employing more than 23,000 people. The company’s history dates back more than 90 years and sells products that include the following brands.
Butterball: the largest producer of turkey products in the U.S. – producing approximately 1 billion pounds of turkey each year. For more than 50 years, the company has provided foodservice and retail products to customers around the world. SEB has a 50% non-controlling stake.
Tabacal: one of the leading brands in the Argentine market, supplying sugar to both Industries (Tabacal brand) as well as the Retail market (Chango brand).
Mount Dora Farms: processes jalapeño peppers at its plant located in Comayagua, Honduras.
Seaboards Foods: one of the largest vertically integrated pork producers and processors in the United States.
Seaboard Marine: world-class ocean carrier with container shipping services with a fleet consisting of 30 vessels and over 60,000 dry, refrigerated, specialized containers and related equipment.
They also have a subsidiary that sources, transports and markets approximately 7 million tons of commodities each year.
All of this adds up to…
- Sales of $6.47 billion
- Gross Margins of 10%
- Income of $365 million
- Book Value of $2,321 per share
- Return on Equity above 15% (average)
- CapEx Rate of 33% to net profit
- Stock buybacks of 100,000 shares since 2005
- Stock Price outpaced the S&P 3 to 1 since 2005.
All signs point to a rock solid company, but is it too late to invest in it?
I first found this stock in 2012 when it came up on my high yield screen where I look to find companies that have the following characteristics.
1. High Gross Margins (for industry)
2. High Return on Equity
3. Low P/E Multiples
4. Near 52wk Low Prices
At the time the stock was trading around $2,000 a share and had earnings in the $270 per share range, giving it a payback rate of about 7 years. Not bad, however, I passed over it because it didn’t meet my baseline test.
Baseline Price Potential = Current Price X Four (4)
However, looking back (hindsight being 20/20) it seems like a no brainer that this company was destined to do well over the last few years. As investors (as opposed to traders) it’s important to look at how businesses do over the long term, and maybe this is one of those stocks that you would be happy owning.
The P/E is 12.50 and there is no end in sight for the potential growth of each unit. I could see future EPS and Book value being 100% higher as well as future share buybacks continuing.
I do think it’s a value stock at this level, but would not want to own it until it hits the $3,000 range. You may feel differently.
If nothing else, it would be wise to keep this on your radar until after April 26. That’s when Seaboard holds a shareholder meeting and will likely address The Humane Society of the United States (HSUS) proposal that Seaboard Corporation publicly disclose potential financial risks related to the use of gestation housing at the company’s hog farms.
As for following the gurus…
Irving Kahn (Trades, Portfolio) has a small stake up about $1,000 per share.
Joel Greenblatt (Trades, Portfolio) had a stake, but sold it after about 10% gains.
