It’s Wednesday, so I’m supposed to discuss stocks hitting 52-week highs or lows. Of the 107 52-week highs and 12 52-week lows, Seaboard Corp. (SEB) stands out among the lows.
According to the Trends with No Friends newsletter, the Kansas City-based agribusiness conglomerate hit its 26th 52-week low on Tuesday. With just 389 StockTwits followers and an anemic average daily volume of 2,610 shares, it could take some time for the little-followed company’s stock to rebound--but it will.
History suggests now is an excellent time to buy the little-followed stock.
Who Is Seaboard?
Seaboard does many things. However, its 52.5% controlling interest in Butterball LLC has kept my attention for years. If not for Thanksgiving, l would never have heard of this family-controlled agribusiness conglomerate.
Between the high share price and significant contribution to the Thanksgiving tradition, I’ve been unable to forget about a company that has its hands in many pies, some more interesting than others.
Seaboard has six reportable segments: Pork (26% of revenue), CT&M (54%), Marine (16%), Sugar and Alcohol (2%), Power (2%) and Turkey. Butterball is accounted for as an equity investment in its financial statements. In 2023, the turkey producer had $2.03 billion in revenue and $166 million in net income, with Seaboard receiving $87 million.
Some of the segments are self-explanatory. Some need more detail.
Pork produces pork.
CT&M stands for commodity trading and marketing. This segment operates under Seaboard Overseas and Trading Group, which conducts agricultural commodity trading, processing and logistics. It has facilities in 26 countries, primarily in Africa and South America.
Marine provides cargo shipping services in the U.S. and 27 countries in the Caribbean and Central and South America. It sells freight services, including transporting import and export cargo by truck or rail to and from various U.S. and foreign ports. Its fleet comprises chartered and owned vessels and dry, refrigerated and specialized containers.
The sugar and alcohol segment is relatively straightforward. It produces sugar and alcohol from its facility in Argentina. Sugar and alcohol are primarily marketed to companies in Argentina, which export some of the products.
Lastly, the power segment is an independent power producer generating electricity for the Dominican Republic power grid. It produces up to 258 MW (megawatts) of power from two power-generating barges.
The Difficulty With Valuing Seaboard’s Business
Seaboard has many moving parts. Given the volatility of its profits, determining the intrinsic value of its shares is difficult for investors.
For example, in 2023, Seaboard’s pork segment had an operating loss of $528 million on sales of $2.52 billion. This is a significant loss, but due to lower power prices, it was almost completely out of the company’s control. Two years earlier, the segment made $227 million on $35 million less in sales.
The reality is that 2023 faced record comparables from 2022’s revenue of $11.24 billion and $657 million in operating income. Since Q1 2015, Seaboard has generated operating profits in 33 out of 39 quarters (85%), with the company achieving two consecutive quarters of operating profits out of three in 2024.
It had 13 consecutive positive quarters from Q4 2019 to Q4 2022; its other big streak was 16 quarters from Q1 2015 through Q1 2019. Historically, it’s proven to deliver consistent profits despite recent indications otherwise.
Valuing Seaboard on a price-to-sales or enterprise value-to-sales basis is more appropriate. The average EV/sales ratio of three of its competitors, Tyson Foods (TSN), Hormel Foods (HRL), and JBS (JBSAY), is 0.9x. So, based on this multiple and the pork segment’s 2023 sales of $2.52 billion, the segment’s enterprise value would be $2.25 billion, or 72% of its current enterprise value of $3.14 billion.
That doesn’t consider the other businesses, including its 52.5% interest in America’s favorite turkey brand. So, a sum-of-the-parts view of the business would generate a much higher valuation. That said, its enterprise value has historically been 0.4x sales, which might never change.
Why Buy?
I’m no technical analyst, so don’t bet your last dollar on my assessment of the chart below. However, I’ve followed Seaboard’s stock for over a decade. It always seems to float between $2,500 and $4,500.
As the red line shows, its bottom between January 2014 and November 2024 tends to be around $2,500. It has hit that mark and bounced much higher on three occasions, the last coming in 2020. It’s overdue.
With two consecutive quarters of operating profits in Q2 and Q3 2024, business has stabilized. History tells us that the company pulls out of its profit funk sooner rather than later.
Another negative besides SEB’s lack of volume is that it doesn’t offer options. Therefore, 100 shares will cost you nearly $258,000 at current prices, which is the value of some homes in America.
You should be able to buy fractional shares of SEB at Interactive Brokers and other reputable firms that offer them. You’ll want to contact them directly to confirm this.
Seaboard is my value play of the day.
