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Strategies & Market Trends : Value Investing

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richardred

toccodolce

To: bruwin who wrote (61942)	5/8/2019 3:20:29 PM
From: E_K_S	2 Recommendations Read Replies (1) of 78673

Bruwin - You are looking in the past. The complete sector view has changed as evidenced by the write downs KHC had to take. BGS is restructuring their product portfolio get a huge price/premium for their leading brands and decided to take it (at the expense of lower revenues). The challenge is to get a clean predictable run rate on revenues, use their stronger balance sheet and future FCF to finance acquisitions (accretive) that will allow future growth (in revenues and EPS). KHC is 26x the size of BGS so BGS has the advantage to pick and choose the right brand/product at the right price/fit for their portfolio. Many of these brands (in the past) carry a huge Goodwill component (KHC,GIS and even BGS took huge write downs to Goodwill recently). I would like to see the expansion of their spice products which carry high margins and may/could be seen as healthy products in the age of processed foods. The CEO is smart, has some wiggle room now w/ their balance sheet to build a legacy product portfolio into a next generation portfolio. It's simple and it's all about the future and building value. It's like an old building w/ a good foundation and structure. Do the remodel update the furnace/plumbing/roof and you have a great new investment. This is what I see BGS is doing. I have been wrong in the past and will be wrong in the future but this (to me) is exactly what investing is (buy undervalued assets w/ good management to make a so/so company a much better & profitable company). I have put in my bet, have another GTC Buy set at $20.26/share (a 15% add) which if filled will get me to a full position or about a 2.5% portfolio position (bring it into my top 10). I expect a $30-$40 price in 5 years but more importantly looking for expanding margins, higher growth and a few accretive 'value/growth' acquisition by our CEO. To me downside small . . get paid a div while you wait and even that may/could be cut and/or eliminated. EKS

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