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Bridgford Foods (NASDAQ:BRID) fits many of the criteria set by Peter Lynch of "Fidelity Magellan" fame in his book, "One Up on Wall Street". The book's main objective is to instruct readers on how to find possible "ten Baggers" (a pseudo baseball analogy to achieving a ten-fold appreciation in a stock selection). Mr. Lynch emphasizes that he is a "story investor" and that each stock selection should be based on clear expectations of its growth prospects. These expectations are derived from the company's "story" such as what the company is going to do or what must happen to bring about the desired results.

Lynch is a clear advocate of investing in what you know, and the more familiar you are with the company, the better you will understand its business and competitive environment. This leads to a higher probability that you will find a good story that will come true. His approach also stresses investments in stocks whose products and services are "easy to understand" as he'd rather invest in Motels than Telecommunications.

Bridgford Foods could be a perfect fit for Lynch's story selection process. BRID's operations are easy to understand, they simply purchase commodities, process them and sell them-basic enough for a third grader to comprehend. The company has no debt or other classes of securities such as preferred or convertible shares to complicate matters. As food purveyors, they are relatively insulated from the negative impact of a recessionary environment because we all must eat. In his prospecting for undervalued situations, Lynch likes to actually visit the company's plants and offices to gain additional insight and perspective. He is looking to see that management is not spending lavishly on expensive office furniture, fixtures or other "nonessentials" such as country club memberships and exotic vehicles, his logic; If they aren't spending on these types of expenditures, the money saved will eventually go to areas that will benefit the business.

BRID meets these parameters and then some. When visiting BRID's Main offices, I found it necessary to walk through a loading dock to reach the reception area that greeted me with a drab room, complete with linoleum flooring and a metal desk-no overspending here! BRID is a very conservative organization, as its top five senior executives all receive an annual salary of $207000, below average , by today's standards. Lynch prefers to see low institutional ownership as well as minimal analyst research coverage because he feels that neglect by these entities offer potential bargains as these company's tend to be relatively unknown. In BRID's case, they have no analyst coverage and only 350000 shares out of 9.4 million shares outstanding are held by institutions.

Lynch's book also stresses identifying positive characteristics such as asset opportunities that can be seized especially real estate or overfunded pension plans. BRID owns processing plants throughout the country on real estate that was acquired at much lower prices than today's current market value, creating "hidden value". It has a pension plan, but it's unclear if it's overfunded or not. Lynch is especially impressed when a company buys back its own stock. The buyback supports the share price and is usually performed when management feels the price is favorable. BRID has a 2 million share repurchase program in effect with about 500000 shares remaining for repurchase. The company recently purchased a 450000 share block back from Forest Hills Capital which represented its entire stake. Until that purchase, Forest Hills was BRID's second largest shareholder. The Bridgford family is the largest shareholder with control of 75%. Is BRID a potential ten Bagger? According to Lynch's selection criteria, it fits the bill, however it has been plagued with skyhigh commodity prices and until these prices start to soften, appreciation will be limited. One recent bright spot that is worth noting is the recent landing of a substantial contract with the US Military. BRID has been selected to provide our troops with "ready to eat meals" under the brand name "First Strike Rations". A ten Bagger? Probably not, but a two or three bagger could be in the cards.

Disclosure: None