The Panic-Proof Portfolio (Stockchase Research)J. M. Smuckers Co.SJMPAST TOP PICKFeb 03, 2022

They report Tuesday. The last time they reported, shares jumped on a merely okay quarter, then slid. He expects another downturn when they report.

Hurt by buying Hostess Brands on the eve of the GLP-1 weight-loss drugs.

SJM is a $10B company with a cheap valuation of 10.3X forward earnings, a high yield of 4.6%, but forward earnings growth for FY2026 is expected to decline about 9%. Analyst earnings estimates dropped significantly following its latest results, as it is seeing declining volumes, higher input costs, and it raised prices to protect margins, but consumers are trading down. Due to these concerns, it is expected to see margin compression in the coming year(s). Its valuation has been compressing over the past decade, and for an income investor, we think it is OK and can eventually recover, but we would not be overly interested in the name here.
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Packaged treat business in general is challenged. Aside from tariffs, input costs are rising around the world due to normal inflation over the years. Growth rate's weaker than what he looks for. Only 3.3% earnings growth rate, though PE is cheap at 10x. Below 200-day MA, and moving lower. Value stocks can always get worse.

Showing 25 RSI, indicating oversold. Wait to see if it recovers. If he held it, he wouldn't 6-18 months from now. Nice yield of 4.5%, should be fairly safe.

They report Tuesday, and he doubts they can escape packaged food purgatory. Pays a 4% dividend, not enough to help the secular decline in this sector.

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.