Comments on Fund My Mutual Fund: Pilgrims Pride Cutting Chicken Output

I found the numbers a little suspect aswell. Its ...

2008-03-12T19:08:00.000-04:00

I found the numbers a little suspect aswell. Its hard to do that type of analysis when a company is young, and you don't really know how the margins might change. I would have though the profits should grow faster than the revenue..? They seem to be like a HOG service company. (as an oil service company is to oil) I do use the analyst numbers as a starting point, but try to decide if they are either too bullish, or too bearishs. That seems to be the best way to use analysts estimates. You do eventually want them to agree to your thesis, and not the other way around. That way you can sell it.

p.s. I would only use analysts estimates as very r...

2008-03-12T18:40:00.000-04:00

p.s. I would only use analysts estimates as very rough guidelines. If you used them for fertilizer you would of missed the entire bull run. I try to develop my own estimate. HOGS has a whopping 2 analysts who follow them, and their revenue is expected to increase by 60% but profits only 18%? (but even the 60% revenue gain is suspect, its only 1 analyst) Unless margins are expected to fall through the floor or tax rate is expected to explode I find it hard to believe. Hence take everything you see from analysts estimates with grain of salt. I posted a long commentary in the fertilizer space about 4 months ago on just that situation and how wrong analysts were on the future estimates, which has proven true. I still think they are wrong which is why I continue to be bullish in that space.

Hi Jeff,I view HOGS more as a play on a fragmented...

2008-03-12T18:37:00.000-04:00

Hi Jeff,
I view HOGS more as a play on a fragmented market. Pork is like chicken or beef is here, the most popular food. HOGS is one of the larger players in a country with 300M or so emerging middle class. I expect them to consolidate part of the industry and maybe be a Smithfield Foods type in a much faster growing part of the world. But we will see. They are VERY young and I believe my smallest cap stock, so the smaller you guy the more inherent risks. This is a long term demographic play, I don't expect any great things in the short run. I don't watch it day to day, it is simply a smaller position and when it dips below 11 I buy and when it goes in 13s, 14s I sell. Eventually it will go higher than 14, I am sure.

There are no comparables for you to compare to - I don't even know if there is another "food producer" in China that trades in the US to be honest. Not to mention hogs specifically.

On another of your comments my belief is worldwide hoarding of food will be an eventual step if things continue down this path; in a very gradual basis. We are already seeing it in wheat... need to feed your own population first.

On a tangent to this topic, what are your thoughts...

2008-03-12T17:59:00.000-04:00

On a tangent to this topic, what are your thoughts on one of your other more obsure Ag derivative plays - HOGS. My take is that with less meat in the US, there won't even be any 'emergency pork' being sent to China anymore. And since meat consumption in developing nations is one of the major reasons for Ag inflation - we have inherent proof that there is increasing demand for meat in those areas. Plenty of organic demand growth over there. Hence more pork packaging, distribution and refrigeration systems. So it all sounds good, but I'm having a hard time finding any comparables in this industry to value the company and its growth prospects. At 1.08 forward earnings, and recent 0.91 gives about an 18% growth rate (yahoo). Looks cheap... maybe? But this sounds like a commoditized and competitve business. I'd want to own the largest and most competitive player in the space, and HOGS seems small.