Bottom of the Barrel: Lots of Dough, No Debt for Bridgford Foods
With a little patience, here's a company that could make you a lot of dough. Literally.
Looking for morsels at the bottom of the barrel this week led us to Bridgford Foods (BRID), an Anaheim, Calif., food processor. Among other things, Bridgford is a leader in frozen bread and dried and cured meats, including beef jerky. The company dates back to 1932, when Hugh Bridgford opened the family's retail meat market in San Diego.
|At a Glance
Bridgford Foods (BRID:Nasdaq)
|Market Cap||$139.1 million|
|Avg. Daily Volume||2,800|
|Source: Market Guide, Zacks, Company Reports|
The company pioneered the retail frozen bread dough market in 1962 from its plant in Anaheim. Since then, the company has added processing plants in Dallas, Chicago and Statesville, N.C.
Food and Fundamentals
In a difficult economic environment, investors look for companies that peddle staples, have clean balance sheets and provide downside protection from dividends. Bridgford, while small and mundane, provides some food for thought and a potential catalyst to nudge its share price higher.Bridgford's staples are food items like bread and meats, and the company has developed volume that gives it the advantage of scale. Bridgford's distribution network is impressive. The company sells its products through 37,000 retail food stores in 49 states and Canada as well as to another 23,000 retail outlets and 22,000 restaurants and institutions. Its growth in prepackaged products for the convenience store market -- including lunch packs with drinks, cookies and chips -- provides additional marketing opportunities for Bridgford.
The Dough, Not the DebtThe company's balance sheet is pristine, operating without debt for 14 consecutive years. While conservative, that type of discipline is exactly what risk-averse investors are seeking, especially in today's market environment. The company also has taken a proactive stance by continuing a million-share buyback program. The stock currently yields 2.1%, and the company is committed to continuing and increasing the payout. Over the past five years, Bridgford has increased its dividend an average of 9% annually.
Sales Environment SoftensWhile Bridgford's financials look solid, recent data suggest the company's sales and earnings momentum is slowing. During the past 10 years the company has posted sales growth of more than 5% annually and earnings growth of nearly 8%, however, both sales and profits momentum has recently slowed.
Can Bridgford Rise to the Occasion?
Source: Company Reports, Thomson Financial, TSC Research
Risks and OpportunitiesWhile Bridgford is a solid, basic company, its small-cap nature creates a number of risks, foremost of which is liquidity. The average daily volume of just over 2,000 shares makes for a choppy market. Before leaping in, check historic sales and pick your entry points. This is the kind of stock for which, as an individual investor, patience and limit orders make a real difference. Also, while the diversity of the company's distribution and client network is solid, a long recession would continue to pressure sales and profit trends. Conversely, costs for raw materials and energy appear to be coming off recent highs, which should help improve margins. Finally, a potential catalyst: Bridgford remains a family-run business, with the Bridgford family owning nearly 70% of the stock. While the family continues to be involved in the business, Bridgford Chairman Allan Bridgford is 66 and Hugh Bridgford, chairman of the executive committee, is 69. Both have been on the company's board since 1952.
| Not Too Jerky
Food company family run and well done
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