insights pleaseI bought this company some time ago when it was below $92 a share and have sent sold the stock at $126 and $130 it’s currently around $133. I would be interested if anyone has any insights regarding the company, as I am still interested in the company. I sold because I became concerned about the selling off of the Canadian dollar and how that will impact profits. I figured that a company that imports juices largely from the USA would have its margin squeezed when the dollar sells off.
I bought this company in the same way I buy many companies, I look at the products I buy and use myself. I noticed that my fridge had several of their products in it. They were often on sale in the store and our house liked many of their blends, however we did not like their smoothie concepts or their olive oil in tetra packs. Initially, I bought just 100 at $92 and again at $86 after a market selloff. They were profitable, treated their employees very will relative to other small companies with full pensions and over a long history of good employee relations, also relative to the industry low in debt and low P/E of 14.6.
With the stock up a lot 30%+ in a year I was time to do more research to see if keeping it the right thing or running away with the profit the right thing. My initial research revealed a trading pattern that it would run up quickly for a few weeks and then go nowhere for several months and then pop up again. When there were general market sell offs it would be taken down a lot but recover quickly again. It’s been doing this for several years. My research revealed that the company is buying their own stock and in fact their own buying may represent close to 40% of the volume of all trades, it’s a very thinly traded stock. However not a takeover candidate as family control is very much in play.
Now at $133 the P/E ratio is up to 20 so not so cheap or a good short candidate either. Sales are up a lot 22% however most of those sales are due to another family controlled business being bought by the company. This concerns me, there seems to be a trend here, the family identifies a good business, buys the business and develops it for a while and sells it to Lassonde at a healthy profit. Further research showed me that most of increase in profits can be explained by 3 events, new products, 33% reduction in corporate tax rates and the rise in the Canadian dollar. Going forward I don’t expect any more tax cuts and the dollar will remain weak as our economy stumbles on poor natural resource values that leaves new products as the only driver.
The new business apple juice and a larger USA foothold in the north east could be great for the businesses other products. For the apples most come from Vermont and so the USA dollar works against them. It appears to me that Lassonde family sold this at the right time. Also I noticed that the company has a large hedging program for currency risk, however they have lost money 7 out of the last 10 years. We all expect that business should hedge currency risk but if they lose most of the time maybe they should not do it, or do it differently. Currency swaps a basic product that most companies do very poor. I believe most companies would benefit by setting a rolling currency range through options rather than a fixed value years in advance.