Stockchase Opinions

Stockchase Insights High Liner Foods HLF-T DON'T BUY Oct 28, 2022

Trevor Rose’s Insights - Trevor’s most-liked answers from 5i Research. Not much to like currently. Has been a value trap. Wait for sign volume growth returns. Falling revenues and high debt.
$12.800

Stock price when the opinion was issued

Consumer Products
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DON'T BUY
He sold it too late. They made a horrible acquisition in southeast Asia. A disaster that they haven't recovered from.
DON'T BUY
Been on a long downtrend and has been consolidating since. It's rangebound these days between $6-8. If it breaks above $8, it could become bullish. Until then, he wouldn't buy it.
BUY
It's in the right space, consumer staples. It's moved from $9 to $7, a big move. Earlier this year, it broke its long downtrend that began in 2016. The worst is over. This may bounce around a bit now. Overall, it looks good. $13 is resistance.
DON'T BUY
To grow, they made lousy acquisitions, which blew up their balance sheet. Their product line is out of favour with consumers. Long-term, still has to de-lever. No earnings or revenue growth.
COMMENT
They have had some difficulties with one of its products. It has a nice dividend, but is not sure if it is sustainable.
DON'T BUY
Long-term and stable? No. He once owned this and made a pile of money. HLF had made some good acquisitions, but made a disastrous purchase of a shrimp company in southeast Asia. This triggered a long slide in the stock. Now, HLF is marginally profitable, but suffers stagnant or falling sales. A pity. Doesn't see growth.
TOP PICK

The company is 120 years old and is the leading brand in North America in frozen value added seafood, number 1 in the Canadian retail segment and number 1 in the U.S. food services segment. Eating fish is considered a healthy alternative to eating meats and although Americans are not big fish eaters, there is good growth potential as attitudes may change. It is paying down debt as well as increasing the dividend by 30% and it recently reported record results. Trades at 7X earnings and insiders own 40%, almost unheard of.

PAST TOP PICK
(A Top Pick Mar 27/23, Down 7%)

#1 supplier to retail channel in Canada, and #1 in US to food services. Sells under own name and private label. Seafood consumption low in NA, huge potential for growth. Revenue growth stalled with consumers cutting back on higher-priced items. In rally mode again. Huge free cashflow, buying back lots of shares, increased divvie by 30%, paying down debt. Dirt cheap at 8x PE. Insiders own 40%. Feels it will be sold down the road.

TOP PICK

Value. Leaders in frozen seafood in Canadian retail and US institutional. PE of 7x. Buying back stock, paying down debt. Increased dividend by 30% last year. Yield is 4.51%.

(Analysts’ price target is $15.42)