WWAV - not ready for us...

Investment Analysis Clubs Saul’s Investing Discussions
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but a good company in a strong industry…

Summary of IBD article of this weekends paper.

After being spun off from Dean Foods 2 years ago, WWAV may now be acquired without tax consequences back on Dean Foods – thus making it a “free agent in a rapidly consolidating industry.

White Wave owns: Horizon Organic, Earthbound Farms, So Delicious, Land-o-lakes and Silk (soy, almond, coconut, and cashew milk).

Analysts say it is highly valued, but may still be the belle of the packaged-food ball.

Some mergers that have happened (Kraft + Heinz, AB Bev trying to buy SAB Miller, Conagra in discussions with Treehouse foods and maybe getting Ralcorp from Post Holdings. Bill Ackman holds Mondolez and says it is a potential takeover target. General Mills bought Annie’s last year.).

There is a health trend away from highly processed foods, which can make companies like WWAV more enticing (as well as pumping up their growth).
Campbell’s sold their European soup business but bought organic baby food maker Plum Organics and Bolthouse Farms and recently bought Garden Fresh Gourmet.
We found that those companies with the strongest health and wellness positioning also possessed the highest growth rates (noted an analyst) …

HAIN and WWAV are best positioned to ride the health and wellness wave (another analyst)

One analyst thinks General Mills is a likely acquirer. WWAV recently bought Wallaby Yogurt and Vega (plant based nutrition).

Article indicates online moms are starting to drive business to these smaller health-oriented companies, especially moms with young children and millennial moms.

I have noted before that Millennials are very different from prior generations, very online and social network oriented, don’t care about a big house, happy hanging in Starbucks with friends instead of in their apartments. They are the drivers of CMG and other “healthier” restaurants, and of course the big health food wave WWAV is riding. Millennials are, or soon will be the largest population (I think as baby boomers start kicking the bucket).

IBD ratings:
Composite 94
EPS 81 (almost too low)
RS price strength 88
SMR = B (Sales + Profit Margin + ROE) composite
Accumulation D+ (Poor)
With the low Accumulation and EPS ratings I would not be tempted at this point.

TipTree’s spreadsheet shows 1 Year PEG at 1.64, too high.

Its industry group is ranked 18 out of 197

http://stockcharts.com/freecharts/gallery.html?wwav

Chart Chat: Possibly working on a cup-like base, but the base building has been below the 50dma, not a sign of strength. I initially liked how it held the 200dma after Black Monday, but I would like to see more up volume on up days at it builds the right side of the base.

Pete

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I might be off base but I also had the impression from reading about WWAV that a lot of their growth relies on involvement in the Chinese market and I am not sure that right now I would want to invest in a stock that has a large component of its theory relying on China.

Craig

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I don’t recall seeing anything about China. White Wave is capitalizing on the US healthy-eating movement, which I don’t think is a “thing” in China. I will keep my eyes open and report back if I find anything.

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My apologies, it was old news and I thought it was more of a current issue but it was from January 2014 regarding a joint venture with Yashili Zhengzhou a subsidiary of Mengniu.

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White Wave is capitalizing on the US healthy-eating movement, which I don’t think is a “thing” in China.

“Healthy eating” takes on a whole different meaning in China.

The 2008 Milk Scandal Revisited

http://www.forbes.com/sites/yanzhonghuang/2014/07/16/the-200…

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OT corporate misdeeds are not limited to humans and diesel cars–
Dogs are involved too

https://en.wikipedia.org/wiki/2007_pet_food_recalls

the same Chinese ingredients were responsible for many dog deaths. The pet food companies using cheapo Chinese ingredients to save a few pennies on a bag of dog food included many “premium” type brands.

And many dog food companies lie a lot
http://poisonedpets.com and do a search for Blue Buffalo The dumb MF profanity censor blocks the full link

The better dog food makers actually keep live dogs and feed them their dog food. Most, including many expensive brands, just follow a formula and assume it is safe, they let the customer’s pet do the quality control testing. This carelessness has been possible because pets are not assigned any significant monetary value in most jurisdictions.

One exception (but then only $5000)
https://www.animallaw.info/statute/tn-pet-damages-§-44-…

Personally my dog is more valuable to me than most of the stuff I own. If I had to choose between my Corolla and my dog, the dog would win every time.

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I live in China about 25% of the time. Food quality and possibility of contamination is a constant concern for me and my Chinese wife and most all of her family and friends.

The problem (among many) is supply chain. There are a multitude of small farms in China. In addition, there are unscrupulous business people (as the 2008 milk scandal showed. BTW, some executives involved in the scandal were executed. I would like to see some harsher penalties for executives here in the US - but I digress).

My wife an I buy most of our meat and produce at a farmer’s market. Shorter supply chain means less opportunity for adulteration. We once bought eggs at the local Walmart and they were covered in a green fuzzy mold within two days. We no longer buy any raw food at a Chinese Walmart (or an American one for that matter).

My wife refuses to eat any street food in China. Her main concern is the oil. She fears it’s contaminated, rancid or unsuitable for consumption for some other reason. I’ve pointed out that eating in a restaurant is no guarantee of higher quality, but she feels that a place with a permanent location offers some assurance of higher quality.

The long and short of it is that the Chinese (or the ones I know in any case) are very concerned about food safety. It is considered an ever present danger. In general, the Chinese believe that food products made in America, Europe, Australia and New Zealand (especially organic foods) can be trusted and many are willing to pay a premium due to their belief in this safety.

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BTW, some executives involved in the scandal were executed. I would like to see some harsher penalties for executives here in the US - but I digress

http://www.cnbc.com/2015/09/21/peanut-executive-in-salmonell…

Peanut CEO get 28 years for falisfying salmonella test. Nine died, and he faced possible life. That will make them stop and think.

'Jurors found Parnell knowingly sold tainted peanut butter from his Georgia plant and faked results of lab tests intended to screen for salmonella. Court officers recommended a life sentence based on reports that the outbreak cost Parnell’s customers $144 million and sickened 714 people