Opinions
Brooke Thackray
Sysco Corp
SYY-N
TOP PICK
Mar 23, 2015
Stock price when the opinion was issued
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(A Top Pick Oct 9/15. Down 2.01%.) At the time he wanted to be a bit more defensive. October to May is really a cyclical time where you want to take on a lot of risk in your portfolio, but he was just not liking the market action, so was being fairly defensive at the time. On this stock, the average gain between Oct 10 to Dec 31 is about 9%, but this hit resistance at about $41.50. During the period of seasonal strength, it ended up with a marginal gain of about 0.12%.
SYY distributes food through the US, Canada and Europe. It has invested in new supply chain inventory management systems for its customers allowing margins to expand and strong profit growth. It trades at 20x earnings and we like that cash reserves continue growing, while debt is reduced and shares bought back. The dividend is backed by a payout ratio under 50% of cash flow. We recommend setting a stop-loss at $71, looking to achieve $92 -- upside potential of 18%. Yield 2.4%
(Analysts’ price target is $87.91)
It is a consumer staples stock and already starting to show positive signs. Normally it does not have seasonal strength until April 23rd, but now is the time to get into it this year. A one to two month hold.