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Best Thanksgiving Stocks

By Jim Fink on November 24, 2010

Last month I wrote that Halloween was my wife’s favorite holiday. Well, now it’s my turn to get even: I enjoy Thanksgiving more than any other holiday. It’s the only time each year that my family reunites without fail. A uniquely American holiday that is secular, joining all of us together — regardless of religious, ethnic, or racial affiliation — in a joyous celebration of gratitude. Since we spend so much time wishing for things we don’t yet have, it is nice to have a day reserved each year to focus on the precious value of those things – and people — we already have in our lives.

History of Thanksgiving

The historical origins of the holiday stem back to the autumn of 1621, when struggling British Pilgrims in the newly-established Plymouth Colony (located in the southeast corner of modern-day Massachusetts) celebrated their first bountiful harvest with a group of peaceful Wampanoag Indians led by Massasoit.  Whenever I think of this first Thanksgiving, I feel good because it proved that people of different cultures can cooperate and coexist in peace if they have good will. 

Unfortunately, this good will ended soon after Massasoit’s death in 1661, culminating during 1675-76 in King Philip’s War (Philip was the anglicized name of one of Massasoit’s sons), the bloodiest war in U.S. history based on the percentage of the population hurt.  I’m glad I didn’t live in my hometown of Northampton, Massachusetts back then because it was the scene of several Indian raids that killed many British settlers. Despite these Indian raids, the memory of Massasoit’s good will has survived up to the present day. The city of Plymouth honors Massasoit with a statue and my hometown has a major residential street named after him.

Thanksgiving is About Food

All of this wonderful history aside, and with all due respect to modern-day parades and football games, most Americans look forward to the Thanksgiving holiday for one reason and one reason only: food!  It’s the one day each year nobody gets mad at you for overeating; in fact, gluttony is expected.  With that in mind, I thought it appropriate to compile my list of the best stocks focused on the Thanksgiving meal.

Granted, the day before Thanksgiving is the busiest travel day of the year, so I could have picked an airline as one of my best stocks, but I have already written about airline stocks and they are just trading vehicles anyway, not long-term investments. Similarly, the day after Thanksgiving is Black Friday, often the busiest shopping day of the year, so I could have picked a retail stock as well. But no, in honor of Plymouth’s Pilgrim Puritans, I’m going to keep my list a pure food list. So, in the words of Adam Sandler in Don’t Mess with the Zohan, “let’s go:”     

1.  Seaboard (AMEX: SEB)

The quintessential Thanksgiving food is turkey because it is a bird native to North America. Benjamin Franklin wanted the turkey to be the image of the U.S. seal rather than the bald eagle, but he was outvoted in the Continental Congress. Franklin viewed the bald eagle as a cowardly thief whereas he saw the turkey as courageous:

The bald eagle is a bird of bad moral character. He does not get his living honestly. Too lazy to fish for himself, he watches the labor of the hawk; and when that diligent bird has taken a fish, and is bearing it to his nest for the support of his young ones, the bald eagle pursues him and takes it from him.

Besides he is a rank coward: The little king bird not bigger than a sparrow attacks him boldly and drives him out of the District.

The Turkey is in comparison a much more respectable bird, and a true original native of America. He is besides, though a little vain & silly, a bird of courage, and would not hesitate to attack a Grenadier of the British Guards who should presume to invade his farm yard with a red coat on.

Consequently, I’m going with the public company that owns a 50% interest in Butterball, the North Carolina-based joint venture that sells 20% of all turkeys eaten in the U.S. That’s more than one billion pounds of gobble, gobble per year, folks. Actually, Kansas-based Seaboard doesn’t own its 50% Butterball stake yet, but its acquisition is pending and should close sometime in December. 

Seaboard is an agricultural conglomerate, with separate divisions focusing on pork, shipping, and grain trading. Interestingly, Seaboard’s Butterball acquisition is an attempt to diversify its meat division away from just pork, whereas the former owner of the Butterball stake – Smithfield Foods (NYSE: SFD) – wants to specialize in pork only. 

I like the fact Seaboard has an alternative energy subsidiary focusing on converting pork fat to biodiesel. Seaboard’s board of directors doesn’t believe in stock splits, so the company has a very high-priced stock at more than $1,900 per share, second only to the $118,000 price tag for a “class A” share of Berkshire Hathaway (NYSE: BRK-A). Despite the high per-share price tag, a price-to-sales ratio of 0.6 and a price-to-cash-flow ratio of only 7.5 suggest Seaboard is not overpriced

Honorable mention goes to Hormel Foods (NYSE: HRL) for its Jennie-O turkey division. The Minnesota-based company’s stock has done extremely well this year and jumped higher recently on good fourth-quarter earnings. The reason: strong sales of Jennie-O turkey products!

2. Campbell Soup (NYSE: CPB)

You can’t have turkey without stuffing and Campbell Soup’s Pepperidge Farm stuffing is the iconic ready-made store brand. In contrast, Kraft’s (NYSE: KFT) Stove Top brand is second-rate and pales in comparison. I’ve had plenty of versions of home-made stuffing filled with nuts, squash, and other non-essential bland crap and none of it compares to the salty and simple artificially-flavored goodness of Pepperidge Farm pure-bread stuffing. Just don’t watch it being prepared – the huge amount of butter called for to make it deliciously moist is rather grotesque.

The company also has a nice line of gravies, including turkey gravy. Unfortunately, gravies and Pepperidge Farm are only small parts of the company’s business. Soup is king at Campbell’s and the soup division is not doing well. The stock recently dropped on news that soup sales were poor in the company’s first quarter of FY 2011. Still, Campbell’s pays a solid 3.3% dividend and is a premier blue-chip. Investing down here in the $34 area is probably a low-risk entry point.

3. Del Monte Foods (NYSE: DLM)

I lived in Chicago for ten years and while out there it quickly became obvious to me that green bean casserole is a Midwestern Thanksgiving staple. A sweet potato dish is also popular. Consequently, I’m tapping Del Monte Foods for its vegetable products, which include green beans and its S&W candied yams (another name for sweet potatoes). In addition, Del Monte’s College Inn brand offers a nice turkey broth base for gravy.

I’m not the only one who likes Del Monte Foods. The stock rose sharply last week on rumors hat buyout firm Kohlberg Kravis Roberts (NYSE: KKR) is preparing a takeover offer for Del Monte at $18.50 per share. With Del Monte currently trading at $17.20, buying now still leaves an additional 7.5% upside if the deal goes through.

Honorable mention goes to British conglomerate Reckitt Benckiser Group plc (LSE: RB.L), which owns the French’s brand that makes the French fried onions that are a critical ingredient sprinkled on top of green bean casserole. 

4. PepsiCo (NYSE: PEP)

No Thanksgiving is complete without cranberry sauce, which adds the perfect amount of tart sweetness to complement the saltiness of turkey and stuffing. In fact, 20% of all cranberry consumption occurs during Thanksgiving week. Although we always see images of cranberries floating in water, the truth is that cranberries don’t grow in water. Cranberries grow on vines in sandy bogs, which are only flooded with water at harvest time to make them easier to pick off the vine.

Another interesting piece of meaningless cranberry trivia: at the end of the Beatles’ song Strawberry Fields Forever, conspiracy theorists were convinced that if you played the record backwards you heard John Lennon saying “I buried Paul.” Rumors began in 1969 that Paul McCartney had actually died in 1966 and had been replaced by a look-a-like. In truth, Lennon confirmed years later that he was actually saying “cranberry sauce” at the end of the song. Does “cranberry sauce” played backwards sound like “I buried Paul?” No. Perhaps a better question is why Lennon said cranberry sauce?

Unfortunately for investors, cranberries are extremely hard to invest in because privately-owned agricultural co-operative Ocean Spray has a virtual monopoly on the industry. The best you can do is buy a distributor, so I’m going with PepsiCo’s Tropicana brand of cranberry juice. Weak, I know, but PepsiCo is a great double-whammy powerhouse of a company nonetheless with its Pepsi/Gatorade/Mountain Dew beverage division and its Frito-Lay salty snack division. Cranberry juice is a minuscule portion of the company’s business, but you can do a lot worse than buying PepsiCo, which pays an above-average 3% dividend.

While cranberry juice is great for preventing urinary tract infections, it doesn’t really scream Thanksgiving, so I’ll add SuperValu (NYSE: SVU) as a bonus selection because its Jewel-Osco subsidiary sells a delicious cranberry sauce that AOL recently judged to be the most flavorful. SuperValu’s stock has been in a steady downtrend of late due to severe competition from low-price warehouse clubs that are getting into the grocery business. The company is also heavily leveraged as it incurred a lot of debt to acquire the Albertson’s supermarket chain four years ago. Still, the stock is a high-risk speculation with tremendous upside if the company can turn things around. And its 3.7% (unsafe) dividend lets you get paid while you wait for a possible turnaround.

5. McCormick & Co. (NYSE: MKC)

Time for dessert and the obvious choice is pumpkin pie. I would normally choose Nestle (Other OTC: NSRGY.PK) because it owns Libby’s Pumpkin, but I already chose this Swiss-based company for Halloween so that would be an impermissible double-dip.

Consequently, I am going with Maryland-based spice maker McCormick & Company, which makes the nutmeg, ginger, and cinnamon spices that are crucial components of a good-tasting pumpkin pie. Let’s face it: nobody likes the taste of pumpkin so the only reason that people like the taste of pumpkin pie is because it doesn’t actually taste like pumpkin. You need to shoot it full of apple butter and spices to make it palatable.

McCormick is a market leader and its stock has been on a tear recently, so it’s not cheap. But the company just raised its dividend 8% and yields a decent 2.3%. Dividend raises are usually signs that more capital appreciation is yet to come.

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