|
|
|
| Cadbury
Schweppes -- A Sweet Defensive Stock for Value Investors |
Published: December 20, 2006
London-based Cadbury Schweppes (NYSE: CSG) may not be as familiar to American investors as it is to those on the other side of the Atlantic. However, that lack of recognition can often work to the advantage of value hunters.
Perhaps the best way to describe Cadbury is this: take the candy operations of a firm such as Hershey (NYSE: HSY), add the chewing gum of a company like Wrigley (NYSE: WWY), and then throw in the beverage distribution of PepsiCo (NYSE: PEP).
With a growing assortment of mints, chocolates, jellybeans, and many other sugary treats (including the popular Cadbury Creme Egg), CSG is the world's largest confectioner. And following a key acquisition in 2003, the firm has jumped to the No. 2 spot in gum production, stocking retailers' shelves with brands such as Trident, Dentyne, and Bubblicious. Finally, a stable of thirst-quenching favorites like Dr Pepper, Canada Dry, 7 Up, A&W, Snapple, and Hawaiian Punch have made Cadbury the world's third-largest soft-drink maker.
Combined, those operations raked in nearly $12 billion in sales last year -- more than double Hershey's $5 billion.
Though revenue growth in the mature candy and beverage businesses can be somewhat elusive, Cadbury has expanded the old-fashioned way -- via acquisitions. In fact, the company has scooped up nearly two dozen firms over the past six years.
The process of integrating all those smaller pieces into a cohesive whole can be disruptive. Fortunately, Cadbury's restructuring efforts are nearing completion, and the company is now ready to put those purchases to work. With that in mind, management has recently outlined two overriding goals -- higher dividend payments and stronger returns on invested capital (ROIC).
To supplement is acquisition strategy, the firm has also found ways to stimulate its organic growth. To begin, management continues to roll out innovative new products (like Cherry Vanilla Dr Pepper) that add a new twist to an old favorite. Furthermore, the company is actively pushing into faster-growing overseas markets. Finally, given the fragmented nature of the global candy business, CSG has ample opportunity to capture market share. On that front, the firm continues to gain traction, picking up share in more than three-fourths of its top 20 markets last year.
Gum, candy, and chocolate are all staple consumer products, and only one company on the planet is a major player in all three categories -- Cadbury Schweppes.
Despite its well-known brands, economies of scale, and commanding market share lead, CSG trades at a discount to many of its peers. The shares are currently trading at just 11 times annual cash flows, versus an industry norm of 17 -- not to mention a wide 20% discount to our $54 fair value estimate.
Note:
The above article was free advice given by Nathan
Slaughter and Paul Tracy -- the editors of Half-Priced
Stocks. The mission of Half-Priced Stocks is to
help readers identify securities that are trading at a steep
discount to their intrinsic net worth. In some cases this
discount can reach up to 50% or more, giving savvy value
investors the chance to purchase quality stocks for just pennies
on the dollar. To learn more about our Half-Priced Stocks
service, please visit the following link:
https://www.StreetAuthority.com/subscribe-hps.asp |
Thanks for reading!
|
Nathan Slaughter
Editor
Half-Priced Stocks, The ETF Authority
|
| To receive
in-depth guidance on today's leading value opportunities every other weekend, plus educational guidance, please subscribe to
Nathan Slaughter & Paul Tracy's premium value investing newsletter --
Half-Priced
Stocks |
|
|
|
Income Security
of the Month
Our "Income Security of the Month" for July 2008 invests in
a fast-growing overseas market that doesn't get much exposure in the
mainstream financial press. And although it typically makes enormous
annual dividend payments -- it has paid an average dividend of 24.9%
per year over the past five years -- this fund is perhaps most
appealing for its total return potential. Specifically, the fund has
delivered total returns of +263.9% since 2003, and
it ranks in the top 10% of its category over the past decade.
|
Top
10 Stocks for 2008!
Since we began publishing this report back in 2003, the picks we've
featured have consistently beaten the broader market -- delivering average
gains of +21.3% per year and outperforming the S&P by a nearly
2-to-1 margin. Act now to reserve your copy of our newest report -- Top
Ten Stocks for 2008. |
|
|
