Have you ever spent time just looking at some of the unique niche companies maybe as a place to park some short term investment funds?
I am thinking of those companies that may offer a single focus on doing one thing right with a well thought out business plan or perhaps having a regional position in a particular industry.
You have probably run across some in your investment research. These opportunities always catch my eye and will often stay on my watch list during my patient research phase before taking a spot in my portfolio. I still have fun learning about these companies. It makes for great dinner conversation. So let's have fun with this one.
I am always intrigued and interested in reviewing some of the small cap niche investment opportunities and will offer some insight from research in this article on a specialty snack foods company with an eye toward healthy/natural and popular trends, a narrow focus chocolate manufacturer/marketer and a regional company with a long stable history.
Inventure Foods, Inc. (SNAK) is a marketer/manufacturer of healthy/natural and indulgent specialty snack brands.
While SNAK is the small cap focus for this article I will also offer some balance by way of comparison with a quick snapshot of two other opportunities in the peer group. They are Rocky Mountain Chocolate Factory (RMCF) and Golden Enterprises (GLDC).
S&P research offers this insight into the packaged food industry:
Longer term, we believe the packaged food industry will focus on consumer lifestyles, tastes, health considerations, and demographics, including both opportunities in developing international markets and the interests and needs of an aging U.S. population. We anticipate industry growth opportunities will include further introduction and distribution of products that appeal to consumers' interest in healthier eating. We believe rising standards of living in developing international markets should provide U.S. packaged food companies with opportunities for growth. Currency exchange rates can affect translation of international profits into U.S. dollars. Year to date, through July 19, the S&P Packaged Foods & Meats Index was up 27.0%, compared to a 19.0% rise for the S&P 1500 Index. In 2012, the S&P Packaged Foods & Meat Index was up 6.9%, compared to a 13.7% rise for the S&P 1500 Index.
SNAK has manufacturing facilities in Arizona, Indiana and Washington, and company literature tells us that SNAK is a marketer and manufacturer of specialty food brands in better-for-you and indulgent categories under a variety of Company owned and licensed brand names. The licensed brand names are pretty impressive and they are T.G.I. Friday's, Burger King, Nathan's Famous, Seattle's Best Coffee and Jamba Juice to name a few.
June 26, 2013 /PRNewswire/ -- Seattle's Best Coffee, together with innovative food manufacturer Inventure Foods, Inc.-the company responsible for bringing the "at home" frozen smoothie category to life in grocery store freezers three years ago-today unveiled Seattle's Best Coffee® Frozen Coffee Blends, available in grocery, club and mass merchandise stores nationwide.
June 19, 2013 /PRNewswire/ -- the latest in a long line of popular frozen "at home" smoothie kit varieties to be developed by innovative food manufacturer, Inventure Foods, Inc. , in partnership with leading smoothie retailer, Jamba Juice Company, Inc.
These trends to "at home" coffee blend products and healthy/natural frozen smoothies were the first to catch my eye and placed SNAK on my watch list. What better upcoming trends can you imagine than these? They remind me of some recent strategy stories with Soda Stream and Green Mountain Coffee Roasters (GMCR).
Corporate Business Strategy
The goals of the strategy are to capitalize on healthy/all natural and indulgent specialty food brand opportunities, provide product innovation targeted to a defined consumer segment, complement, rather than compete directly against, large national competitors with leading national brands, and build relationships with major retailers in all channels of distribution by providing them higher margins, excellent customer service and constant innovation.
The Company plans to continue its innovation activities to identify and develop (i) new line extensions for its brands, such as new flavors or products, and (ii) new food segments in which to expand the brand's presence.
Here is the information that I made particular note of, which bodes well for the projected growth numbers. The Company's Indiana, Arizona and Washington facilities are currently operating at approximately 40%, 75% and 50% of their respective manufacturing capacities. The Company continues to secure new manufacturing opportunities in private label and co-packing arrangements, as well as expand upon its own branded product lines.
Briefly here is a snapshot of RMCF and GLDC to offer us some peer group comparison. Who knew that you could invest in a snack company with a regional focus on the Southeastern Conference (SEC)?
Golden Enterprises, Inc. is a holding company which owns all of the issued and outstanding capital stock of Golden Flake Snack Foods, Inc. (Golden Flake). Golden Flake is a producer, marketer and distributor of snack products in the Southeastern United States.
The Company manufactures and distributes a range of salted snack items, such as potato chips, tortilla chips, corn chips, fried pork skins, baked and fried cheese curls, onion rings and puff corn. Golden Flake also sells a line of canned dips, pretzels, peanut butter crackers, cheese crackers, dried meat products, and nuts packaged by other manufacturers using the Golden Flake label. Golden Flake sells its products through its own sales organization and independent distributors to commercial establishments, which sell food products in Alabama, Tennessee, Georgia, Mississippi, Louisiana, Kentucky, and South Carolina as well as parts of Florida, North Carolina, Arkansas, Missouri, Oklahoma, Virginia, Indiana, and Texas.
And, have you ever visited Aspen and had a taste of some of the great chocolate or better yet had a friend or family member send you a gift box for a birthday or holiday, what a delight that is for me as a chocolate lover.
Rocky Mountain Chocolate Factory, Inc. is an international franchisor and confectionery manufacturer.
The Company is engaged in the manufacturing of a range of chocolate candies and other confectionery products. As of March 31, 2012, there were 10 Company-owned, 49 licensee-owned and 296 franchised Rocky Mountain Chocolate Factory stores operating in 40 states, Canada, Japan, and the United Arab Emirates. The Company's wholly-owned subsidiary Aspen Leaf Yogurt, Inc. had nine ALY Company-owned and four franchised stores operating in nine states as of March 31, 2012. In January 2013, it acquired certain assets of Yogurtini International, LLC.
By the Numbers and Financial Ratio Comparisons
SNAK company reports say that the newly acquired Willamette Valley Fruit Company added $1.0 million in net revenues and Seattle's Best Coffee frozen coffee blends launch contributed $2.0 million to gross revenues. Gross profit margin declined 220 basis points to 17.0% from 19.2% last year, primarily due to increased brand support, partially attributable to the Seattle's Best Coffee launch and a decrease in sales of T.G.I.Friday's products.
For fiscal year 2013, analysts estimate that SNAK will earn $0.34. For the 2nd quarter of fiscal year 2013, SNAK announced earnings per share of $0.07, representing 21% of the total annual estimate. For fiscal year 2014, analysts estimate that SNAK's earnings per share will grow by 35% to $0.46.
For the third quarter 2013, analysts estimate SNAK will earn $0.11 per share, an increase of 20.67% over the prior year third quarter results. For the third quarter 2013, analysts estimate SNAK will generate revenues of $54.1M, an increase of 16.03% over the prior year third quarter results.
Price/Tangible Book Value (MRQ)
Tangible Book Value/Price (MRQ)
Dividend Yield (%)
Though SNAK offers some respectable numbers by peer comparison in valuation it doesn't necessarily impress. GLDC would probably be named the winner in valuation based on P/E, Price/Sales, Price/Cash Flow and also my favorite - Dividend Yield.
EPS Change (%)
Sales Growth (%)
Gross Profit Margin (%)
Net Profit Margin (%)
Cash Flow Margin (%)
Cash Flow per Share
Return on Assets (%)
Return on Equity (%)
Return on Investment (%)
Sales per Employee
SNAK again is very respectable in growth by leading the peer group year over year, margin percentages are in line with peers and return ratios are impressive.
As I use more of a value approach (i.e. position within industry, industry position within the current economy, opportunity for capital appreciation, current price performance), SNAK, RMCF, and GLDC all have merit for consideration for investment. Let's review the candidates. SNAK is progressive in its business strategy to move into trend spaces for health/natural snacks and at home products while RMCF is a unique product line with wide distribution in the US and internationally and GLDC is a good idea for SEC fans with a regional niche and a long history of stability.
Finally, how do these fit within my current portfolio? Again, the majority of my portfolio is weighted toward Growth and Income Strategy investing. The 3.46% and 3.55% yield for RMCF and GLDC respectively is of particular interest in the current income strategy and SNAK would have to find a place in the small segment in the portfolio weighted for value and capital appreciation with a small amount of speculation thrown in based on how sold you are on the stated trends.
SNAK, RMCF, and GLDC are likely small cap candidates to remain on my watchlist noting future trends prior to being added to my portfolio.
Disclaimer: These are only personal opinions and all readers should do their own research. Readers are accountable for investment decisions and trades.
Securities prices and yields quoted are current as of August 16, 2013.