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Eight Stocks Profiting From Your Bagged Lunch
University professors have carried out studies to determine how many middle school children take bagged lunches each day, and the content of those lunches. It's not certain how many adults do the same but a recent poll by the Dayton Business Journal found that over half the respondents were eating lunch at their desks - more often because of the recession. So who is profiting from the "brown bag movement"? (Learn other ways to save in our article, Save Without Sacrifice.)
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Fancy Containers
Gone are the days of the brown bag lunch, replaced by fancy microwavable containers that sit waiting to be devoured in the office fridge. Some people go to great lengths to scare off would be thieves looking to move-up in lunch quality. As such, it would come as no surprise if Tupperware (NYSE:TUP) and Newell Rubbermaid (NYSE:NWL) invented a container that included a small alarm to scare away possible offenders (they've pretty much thought of everything else). In fact, the container market is an extremely competitive business. Not only is there Rubbermaid and Tupperware, but Clorox's (NYSE:CLX) Glad division is also knee-deep in containers. Throw in privately owned SC Johnson's Ziploc brand, and we're talking about a very crowded marketplace.
The South Will Rise Again
Atlanta-based Newell Rubbermaid had a tough year in 2008, actually losing $52.3 million thanks to $299 million in impairment charges. However, the food storage business didn't seem to suffer, achieving high single digit revenue growth while delivering the largest operating profit of all four divisions. Moving ahead to its first quarter, excluding impairment charges, earnings per share were 20 cents, equal to Q1 2008. An encouraging sign indeed, it reiterated full-year EPS of $1-1.25 on revenues of between $5.5-5.82 billion. That's ahead of analyst views. At today's stock prices, it's trading at just 8-10 times forward earnings. Since taking the helm in 2005, current CEO Mark Ketchum has done a great job managing the business, growing revenues and operating profits each year until 2008. This setback should be considered temporary. (See Impairment Charges: The Good, The Bad and The Ugly to learn more about what the term actually means.)
Competitors Look Strong
Both Clorox and Tupperware are healthy companies. Most importantly, over the last two years the company has gone to work rebuilding the Glad brand's economic profit. That's good for Glad, because Clorox won't hesitate to sell it if it's underperforming. As for Tupperware, its food storage business accounts for 65% of its $2.1 billion in revenue and 80% of its segment profit. It definitely gives Rubbermaid a run for its money.
Rounding Out Menu
The first ingredient in any lunch bag is bread for a sandwich - hence, the recommendation for Flowers Foods (NYSE:FLO), whose 39 bakeries pump out lots of it. Next, you need peanut butter and jelly, and who better than Smucker's (NYSE:SJM) to provide the goods. Contributing a healthy drink alternative is Pepsi (NYSE:PEP) with its Naked Juice beverage. Also with Pepsi, no lunch box can go without Lay's potato chips (however, the baked version might be the best bet). As for fruit, how can anyone resist Del Monte's (NYSE:DLM) fruit cups? Rounding out lunch is Lifeway's (Nasdaq:LWAY) eight-ounce low fat strawberry banana kefir - a healthier alternative to yogurt.
Bottom Line
If you look more closely at the lunch you bring to work, you'll find a very solid investment portfolio is hiding right underneath your nose. (For a related read, check out Industries That Thrive on Recession.)
Fancy Containers
Gone are the days of the brown bag lunch, replaced by fancy microwavable containers that sit waiting to be devoured in the office fridge. Some people go to great lengths to scare off would be thieves looking to move-up in lunch quality. As such, it would come as no surprise if Tupperware (NYSE:TUP) and Newell Rubbermaid (NYSE:NWL) invented a container that included a small alarm to scare away possible offenders (they've pretty much thought of everything else). In fact, the container market is an extremely competitive business. Not only is there Rubbermaid and Tupperware, but Clorox's (NYSE:CLX) Glad division is also knee-deep in containers. Throw in privately owned SC Johnson's Ziploc brand, and we're talking about a very crowded marketplace.
The South Will Rise Again
Atlanta-based Newell Rubbermaid had a tough year in 2008, actually losing $52.3 million thanks to $299 million in impairment charges. However, the food storage business didn't seem to suffer, achieving high single digit revenue growth while delivering the largest operating profit of all four divisions. Moving ahead to its first quarter, excluding impairment charges, earnings per share were 20 cents, equal to Q1 2008. An encouraging sign indeed, it reiterated full-year EPS of $1-1.25 on revenues of between $5.5-5.82 billion. That's ahead of analyst views. At today's stock prices, it's trading at just 8-10 times forward earnings. Since taking the helm in 2005, current CEO Mark Ketchum has done a great job managing the business, growing revenues and operating profits each year until 2008. This setback should be considered temporary. (See Impairment Charges: The Good, The Bad and The Ugly to learn more about what the term actually means.)
Both Clorox and Tupperware are healthy companies. Most importantly, over the last two years the company has gone to work rebuilding the Glad brand's economic profit. That's good for Glad, because Clorox won't hesitate to sell it if it's underperforming. As for Tupperware, its food storage business accounts for 65% of its $2.1 billion in revenue and 80% of its segment profit. It definitely gives Rubbermaid a run for its money.
Rounding Out Menu
The first ingredient in any lunch bag is bread for a sandwich - hence, the recommendation for Flowers Foods (NYSE:FLO), whose 39 bakeries pump out lots of it. Next, you need peanut butter and jelly, and who better than Smucker's (NYSE:SJM) to provide the goods. Contributing a healthy drink alternative is Pepsi (NYSE:PEP) with its Naked Juice beverage. Also with Pepsi, no lunch box can go without Lay's potato chips (however, the baked version might be the best bet). As for fruit, how can anyone resist Del Monte's (NYSE:DLM) fruit cups? Rounding out lunch is Lifeway's (Nasdaq:LWAY) eight-ounce low fat strawberry banana kefir - a healthier alternative to yogurt.
Bottom Line
If you look more closely at the lunch you bring to work, you'll find a very solid investment portfolio is hiding right underneath your nose. (For a related read, check out Industries That Thrive on Recession.)
by
Will Ashworth
Will Ashworth lives and works in Toronto, Canada. He's worked in and around the financial services industry for much of his adult life. He loves investing and is passionate about helping others learn how to put their money to work.
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