Tyson Foods Inc. (TSN)

This is thought of as the chicken giant, but they’re also big in pork and beef. They are going through a transformation that started a number of years ago where they are moving up the value chain where people want food on the go. Doing a good job of putting products into convenience stores, etc. She is expecting them to just continue on with their plan which will result in a higher share price. (Analysts' price target is $80.)

They are currently being sued by the government because of price collusion, working with the other meat suppliers to keep prices high. Also, the supply of meat in general is high. This has a very high free cash flow yield.

(Top Pick Feb 25/16, Down 6%) They have some interesting assets and it is an attractive place to be. They will make more acquisitions in the next 2 or 3 years. It is a difficult space. There is no revenue growth for anyone.

Has been a yoyo over the last year. They had headline risk that they manipulated chicken prices. They are the largest chicken producer. He refers SAFM-Q because their valuation is cheaper and they are smaller.

In a volatile market and a slowing economy, it is usually consumer stocks that perform well, especially food stocks. She is betting that this stock will get re-rated. Hormel (HRL-N) is trading at 30X earnings, but is not expecting this one to get re-rated to that. This is currently at 16X and just reported a phenomenal quarter. Making acquisitions which diversifies away from their commodity products and getting more into branded products. Not only will the margins improve, but the predictability will also improve. Dividend yield of 0.9%.

Has done okay in the last little while because of their acquisition of Hillshire Brands last year. That is going to provide the company with entry into the wider margin prepared foods market. Valuations are a bit stretched and the growth is not extremely high. Trading at around 13-14 times forward earnings, and the growth rate is probably 6%-8%, so you are not looking at a very robust long-term EPS growth rate. He prefers others.

(A Top Pick June 18/14. Down 19.37%.) Pairs Trade. (Long Pilgrim’s Pride (PPC-Q) and Short this.) Materialized a lot faster than expected, so he exited his position.

(A Top Pick Nov 20/13. Up 35.05%.) The business has transformed so much. New management came in and went from some of the highest cost producers to some of the best producers. Recently made an acquisition, so she sold her holdings into that. They seem to be getting good assets, particularly in the breakfast space. Has a strong business outlook.

Pairs Trade. Short Tyson Foods and Long Pilgrim’s Pride (PPC-Q) and Trading at about 15X earnings.

Chicken, beef, and pork. Packaged and sold to grocery stores. Used to be a very volatile stock. Depended on commodity prices in the past. A new management team improved them. They now have a strong business model and trade at 11 times earnings.