It Is Tough to be a Semi-Weasel
Let’s keep reviewing the portfolio now that the quarters are in, starting with the Consumer Staples sector.
It makes my teeth hurt to be recommending Sysco - SYY - $80, near its high, when there are 10 decent value ideas in the same sector.
Sometimes the most difficult thing for a value investor to do is stick with ideas when they are working. SYY has been a positive contributor to performance this year, and the story is unfolding exactly as I expected. SYY is starting to see a turn in small non-chain restaurants, and they have stabilized their driver/salesforce issue.
I hear the other ideas in this sector calling to me every day. Eventually I will answer, but right now I am being a little stubborn and letting SYY “play out”.
Consumer staples are only 5% of the mid-cap value averages, but I am happy being over-weighted given the value. Eventually I want to move toward some smaller cap names, but right now Pepsi and Tyson are classic value ideas. SYY is kind or a placeholder.
My consumer staples stocks:
Pepsi - PEP - $145 - 20 different $1 billion dollar brands, not just soft drinks, only 18x with a 4% yield, international is doing well
Tyson Foods - TSN - $57 - good quarter, beef cycle is turning, really more of an agricultural cyclical than a consumer staples idea
Sysco - SYY - $81 - still the best in the business at supplying small restaurants
My 10 best consumer staples ideas in order:
Flowers Food - FLO - $16 - 6% yield, great little company, bakery is a tough segment. they just raised the dividend, they report this Friday
Constellation Brands - STZ - $175 - Buffett bought is at $220, what is not to like?, significant tariff issues
Limoneria - LMNR - $15 - there are a half dozen small cap food stocks that deserve attention, and this might be the best, or maybe SunOpta - STKL - $6
Coty - COTY - $5 - Beauty is a great category, but there are China issues here, maybe Estee Lauder - EL - $90 is better?
Lamb Weston - LW - $51 - french fries can’t be bad forever?
Diageo - DEO - $109 - is drinking really being replaced by gummies, maybe?
MGP Ingredients - $28 - another great small cap, buy tied to booze
Clorox - CLX - $124 - so many little nagging problems
General Mills - GIS - $50 - can you turn around cereal?
ConAgra - CAG - $19 - 7% yield, frozen foods are growing, but competitive
It just feels bad to be in big cap names. But with all the focus on big cap tech names it seems to me that big cap staples stocks are really being ignored.
I will be sick if Limoneria is $30 next summer, but right now the risk/reward is leaning toward the big caps.
Or maybe I am just a grumpy old semi-weasel, pretending to write about value investing.
xxxxxxxxxxxxxxxx
P.S. - my trip to Wendy’s was horrible, the chicken strips are not available yet, the Frosty machine was not working (they did have lots of new flavors), they had no Coke in the soft drink machine
The burger was only ok, good onions, but bad pickles, BK has better buns. The beef quality used to be better.
There are two chicken fast food places within 100 yards, will the WEN’s strips really be better?