Martin Cobb, ASIPSaputo Inc.SAP.TOPAST TOP PICKNov 26, 2025

A year ago their problem lay in their US business which is more about services and less retail. Their milk cheese business in the US was tough. Investors have fallen out of love with this. Little growth at the time, but business has partially recovered till the stock is expensive. He is exiting.

Company's in turnaround phase. Have to look at the fundamentals and the valuation. Ask yourself why you bought it in the first place, and where you think it's going to go. It's not about the past, it's all about the future. In particular, what's going to be the demand for dairy and associated products? Best name for access by global markets to cheese.

Trades at 27x PE, pretty expensive for a food company. Investor may wish to sell half and allocate capital elsewhere. If you doubled your $$ and you sell half, the rest is "free".

Good time to sell. Doesn't like the company. Did well for 2 decades, and then law of large numbers caught up to it. Acquisitions diluted overall quality of the business, putting pressure on ROE. Dairy and supply management in crosshairs of US administration.

Surprised by its dramatic move this year. Some improvements at the company. He'd be concerned about government support for the dairy sector in light of CUSMA being renegotiated. Global trade is getting more difficult, especially in protected industries. Certainly not a buy for his clients. Better things to own.

Delivered a good quarter.

(Note the short timeframe.)  In Canada, it's retail. But south of the border it's more food services and is #3, and the US is dragging down its profitability. If it can return to half of former levels in US, it will be a very cheap stock at this point.

The US is their biggest market where there's overcapacity in milk-cheese, so SAP has to work through that. They used to earn 10% operating margins there, but now it's a loss. But if they recover there and continue to grow in Canada and internationally, this will look cheap. The Canadian market is more about retail, not food service in the US, so more stable with more pricing power. 

Has major operations in Europe, yet it's a Canadian company trading on the TSX. There are issues dealing with dairy and the commodity side of the business.

Lots of pressure within Canada on protected costs around dairy products. Might be an easier place for our government to give in on something, so wouldn't surprise him if our dairy protection weakens or softens a bit.

Completely unloved today. #1 in Canada, #2 in UK and Australia, #3 in USA. Pre-pandemic, very stable. Food services division hasn't really recovered, especially in the US. Exposed to commodity prices, industry capacity needs to be taken out, cost-cutting needs to continue.

Not as high quality a business as he first thought, but excessive negativity baked into the share price. Yield is 3.2%.

At 13X forward earnings and having a steady growth and margin profile over the years, we think it is getting interesting. It still has some issues to work through related to their Argentina business but this is likely getting priced in at these levels. 
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It has made progress but in the macro environment of inflation in Argentina it has under-performed.

He is not covering them right now. He is looking for extraordinary stocks priced for growth. This one is OK but there are better places to be.

He's staying away from consumer staples stocks, unless they have some real edge. With dairy products, hard to get a margin and hard to set price.