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By Matt Doiron

David Murdock has a rich history with Dole Food Company, Inc. (NYSE:DOLE). He bought the company in 2003 and took it public six years later, and has maintained a large stake since then. He serves as chairman of Dole's board of directors. Murdock, a member of the Forbes 400, has also been in the news recently for selling 98% of the Hawaiian island of Lana'i to fellow billionaire Larry Ellison.

This week, Murdock filed with the SEC to report that he had bought more shares of Dole for his living trust. The trust had formerly owned just over 40 million shares, and the most recent purchase as of August 1st brought the trust up to 40.8 million shares; combined with Murdock's direct holdings, he now possesses nearly 52.6 million shares of the stock, giving him close to 60% of the company.

According to the Form 4, the most recent purchases took place at an average price of $11.78, just below the price as of this writing of $11.86. At that average price, the purchase of just over 600,000 shares was worth over $7 million. Murdock had also added shares in late July at an average price of $10.15 (see a history of insider purchases at Dole and find academic studies on insider trading).

Hedge fund activity in Dole is limited. Aletheia Research and Management, which is managed by Peter Eichler Jr., owned 3.6 million shares of the company at the end of March and had been steadily reducing its position from 6.6 million shares at the end of the first quarter of 2011 (see the rest of Aletheia's portfolio). Billionaire Jim Simons' Renaissance Technologies and Tom Steyer's Farallon Capital had also tiny positions in Dole Foods (see Simons' top holdings).

Dole's 10-Q for the second quarter of 2012 reported a 10% decrease in revenue compared to the second quarter of 2011, and earnings per share fell from 93 to 73 cents. For the first half of the year revenue is down about 7% and earnings are flat. The poor results so far this year are being driven by the fresh fruit segment, with the smaller business units providing fresh vegetables and packaged foods seeing revenue growth. Dole's $1.1 billion market cap gives it a trailing price-to-earnings ratio of 29; analysts provide estimates - which imply a forward P/E of 8, but with narrow margins and negative revenue growth, it is difficult to see the growth case they project.

The closest large-cap public competitor of Dole's is Fresh Del Monte Produce (NYSE:FDP), a similarly sized company that also provides fresh fruit and produce. Fresh Del Monte has several advantages over Dole: it trades at a lower multiple of trailing earnings (11.5), it is much less exposed to movements in the broader market (beta of 0.5 versus Dole's 1.3), it pays a small dividend yield of 1.6%, and it grew its margins enough in its most recent quarter to convert an 8% decline in revenue - similar to what Dole experienced - into an increase in earnings of over 60% compared to the same period in the previous year. We think that Fresh Del Monte makes a better buy between the two.

We can also compare Dole to Lancaster Colony (NASDAQ:LANC), whose leading business units is specialty foods such as salad dressings, and Heinz (NYSE:HNZ). These companies also have little market exposure with betas between 0.3 and 0.4. Their forward P/E ratios are in the high teens, higher than that for Dole, and both companies saw substantial declines in earnings in their most recent quarter (of course, Dole did so as well). Both pay dividends, with Heinz's yield being particularly high at 3.7%. We don't think either of these companies is a substantially better or worse investment than Dole.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

Source: Billionaire David Murdock Closes In On 60% Of Dole