Bridgford Foods: To the Victor Go the Spoils

| About: Bridgford Foods (BRID)

Anybody who had purchased BRID in the last seven years is ahead of the game, but just eight short months ago, all those who had acquired shares during the last twenty two years were under water when the shares hit an “insane” all time low of $2.53 in March. What a difference eight months makes - now the shares have nearly quadrupled along with the announcement of its first cash dividend in nearly six years. The moral of the story: patience sometimes pays off in a very big way.

Cash Dividend planned: BRID announced it intends to pay a special onetime ten cent cash dividend for shareholders of record on 12/8/09. Although this is less than the company’s previous annual 28 cent dividend, it is certainly a step in the right direction and a confidence builder. This action, in a sense, is management paying themselves a bonus for a job well done, as they will receive $770,000 of the $940,000 paid out, with the remainder being distributed among outside shareholders.

Things are looking up: The company is on a roll and is on pace to deliver one of its best years ever. In fact, just a decade ago, when BRID shares reached an all time high of $24, it earned almost $10 million on revenues of $156 million.

Ten years later, BRID is not too far from reaching those levels once again - when BRID reports its fourth quarter earnings in early January (expected revenues of $37 million and earnings of 21 cents, during a longer 16 week period) the company’s annual results should reach $4.5 million in earnings ($.59 per share) and $120 million in sales resulting in a very reasonable trailing multiple of 15.

What’s next: After a huge run-up, the shares are no longer a steal, but appreciation prospects are still intact. The company’s gross profit margin of 42.6% has improved 1000 basis points (thanks to lower input costs) and its cost cutting efforts continue to gain ground as its SG&A costs of 35.3% were trimmed 310 basis points in its latest quarter. The company still has nearly 500,000 shares available under its stock repurchase plan and with less than 1.75 million shares owned by non insiders, it could be argued that it would be logical for the Bridgford family to tender the balance of the shares they do not already own, taking the company private.

Bottom line: This one could go higher, as a trend in motion will stay in motion until some outside force knocks it off course. The point is, BRID has been on a steady course of improvement the last nine months and it makes sense to stay with the trend. Although the bulk of the stock's appreciation is in the past, there is no reason the shares cannot double from current levels in the next twelve months, making the next batch of buyers “victors” too.

Disclosure: long