Insiders Nibbling at Food Stocks

The way that the market has obliterated the food companies lately, you would think that “eating” has been rendered obsolete. Therefore, all food companies must be headed for certain financial ruin. Obviously this idea is about as far-fetched as the notion that I can walk on water. The reality is, food is a vital requirement of life, and food companies are destined again to “fly high”. If you stand back, take a deep breath, and look at the big picture: it is clearly evident that food processors are headed for better days, as their input costs have dropped considerably (grain and fuel) while their selling prices are in the infant stages of improvement, due to successful capacity reductions.

Follow the smart money: who has the most intimate knowledge of a company’s true potential? The insiders, of course! They comprise the officers and directors of the corporation. Are they buying their own company’s shares or selling them? You want to replicate their actions: if they are buying stock, you should be buying stock. If they are selling, you shouldn’t touch the company with a 10 foot pole.

Tyson Foods (TSN): The founder’s son, Don Tyson, has had a voracious appetite for TSN shares recently, purchasing a total of 4.62 million shares at $12.75 per share, amounting to a cool $59 million. The purchases were accomplished through a secondary offering the company completed in early September. Two officers of TSN, had better timing, as they were able to add positions at almost a 60% discount to Don Tyson’s purchase. David Van Bebber was able to purchase 10,000 shares at $6.04 per share while Don Smith bought an 8000 share block at $4.66, and an additional 2000 shares at $5.02.

Sara Lee (SLE): CEO Brenda Barnes purchased two 10,000 share blocks in early November, one at $9.60 and the other at $9.79

Smithfield Foods (SFD): George Richter (Officer) has purchased shares in an attempt to get richer, but his purchase has managed just the opposite (the shares have sunk 60% since his acquisition). He purchased 19000 shares at $13.17, while his contemporary, John Schwieters, gobbled up 5000 shares at $14.80. Paul Fribourgh (Director) has been on a buying spree recently, and now has accumulated 12.6 million shares creating a 9% stake. All is not rosy though, as John Luter (Director), a significant holder of 3.5 million shares, appears to be in a “looting” mood of late, as he has sold roughly 1.4 million shares, trimming his stake by 28%.

ConAgra (CAG): A total of five insiders have purchased 33,165 shares within the past 6 months.

Chiquita Brands (CQB): Director Durk Jager, bought 10000 shares at $9.03 on 11/14 ,while Fernando Aguirre (officer) pulled the trigger on 56,300 shares for $8.81, the day earlier.

Del Monte (DLM): In mid October, five DLM insiders purchased a total of 57000 shares.

Bottom Line

Follow the insiders. They qualify as the “smart money” because they have a better understanding of their company’s operations and potential than anyone else. It is significant when they put their own money on the line, which I consider one of the strongest buy signals possible.

Disclosure: Author holds long positions in CQB, SLE, CAG, DLM, TSN and SFD.

Comments

[PeteK:]

TSN is like a big strong tree, nothing can blow it away.
It will only grow bigger.
Love that company.

2008 Nov 28 08:53 AM