J. M. Smuckers Co. (SJM-N)

They report Tuesday. Shares have stalled lately, because Wall Street has lost faith in the defensives. If SJM reports a beat, money may flow back into this sector.

It should capitalize on restaurant closures in the current lockdown, but this stock is wildly inconsistent. SJM holds a curious assortment of products. He thinks SJM is ready to catch up, but prefers Hormel.

They have a large proportion of their business is coffee. They just made a big pet food acquisition. Debt to equity ratios for these kinds of companies tend to be high because they have a high credit rating due to the fact that they are inelastic – people have to buy the products regardless. Their problem is that their revenues are starting to slide. Little eCommerce startups have eroded 3% of all the revenues of all the big guys. There is nothing wrong with the company and it is a matter of how quickly they can get the revenues back up.

This is another of those boring US consumer product names. We now have an $.80 dollar that is good for purchasing US stocks. Good discipline with their balance sheet. A quality company. Dividend yield of 2.5%. (Analysts’ price target is $131.)

It looks like the downside is not over. Could it get back to $96? It could, because the model price is actually falling. If you own it, look for $96 which is where he would buy more. It could test resistance again at $132.65.

It is ripe for consolidation. It is always a bit of a richly valued company. Food and beverage is traditionally the safe place to be. They have done a good job with reinvestment opportunities. They have a long term record of growth and sustainable results.

The stock has done really well and relative outperformance has been great. This gives you a low to mid-teen pretty steady grower on an earnings basis. He feels okay about this.