Tyson: Sifting Through The Wreckage

Aug. 07, 2018 2:37 PM ETTyson Foods, Inc. (TSN)4 Comments


  • Tyson Foods stock has slowly declined ultimately pulling back heavily in 2018.
  • This morning BAD BEAT Investing discussed the stock as a strong buy under $60.
  • With fears over inflation, rising feed costs, and international trade concerns, Tyson and similar companies are a bargain.
  • We discuss segment specific performance to be aware of and update our 2018 projections.
  • This idea was first discussed with members of my private investing community, BAD BEAT Investing. To get an exclusive 'first look' at my best ideas, start your free trial today >>

This morning, Quad 7 Capital's BAD BEAT Investing discussed Tyson Foods (NYSE:TSN) as a buy strong buy under $60. Here is the deal. With fears over inflation, rising feed and labor costs, and international tariffs, investors have been jumping ship. We believe at $59 a share, the Street is mispricing the stock. In this column, we will describe what we are seeing in this leading world supplier of proteins to industry and retail supermarkets. Currently, we have seen an extended selloff and we believe it is time to get long.

Extended selloff

Investors have slowly sold off shares of Tyson (and that of comparable businesses) in recent weeks. Both traders and long-term investors should be excited at these levels. The stock is cheap on a valuation basis at 7 times trailing earnings and even cheaper on a forward basis. The problem is that investors are both profit taking and selling on inflation/cost fears. Shares have pulled back significantly in 2018 and are at $59 at the time of this writing:

Source: BAD BEAT Investing

While Tyson has been a great trading vehicle, specifically on the short side of late, it is our belief that the stock is a strong long-term buy that investors should be taking advantage of following this extended dip. We believe another buying opportunity is here not just because shares are declining, but because we have been encouraged after the recent earnings.

Revenue growth

Revenues have been growing at Tyson, in part helped by acquisitions and in part by organic growth. Take a look at Q3 over the last few years:

Source: SEC filings, graphics by BAD BEAT Investing

Momentum coupled with performance relative to the Street's expectations drive action in a stock. Right now, momentum is a bit negative, but the value case is building. While the revenues came up

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Disclosure: I/we have no positions in any stocks mentioned, but may initiate a long position in TSN over the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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