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Fishing for Returns From Seafood Processors

As part of a balanced diet, Canada’s Food Guide recommends eating at least two servings of fish each week. This includes char, herring, mackerel, salmon, sardines and trout. Your stock portfolio also needs to be well-balanced. Here are two Canadian seafood processors to consider as an addition to your investing plate.

1. Clearwater Seafoods  (TSX: CLR) is North America’s largest vertically integrated harvester, processor, and distributor of premium shellfish. The company sold more than 81 million pounds in 2013. It operates a large fleet of vessels and owns a number of processing plants in Eastern Canada. Clearwater introduced an annual dividend in 2013 of $0.10 per share, payable in quarterly installments of $0.025 per share.

The company is the largest holder of shellfish quotas and licenses in Canada. Moreover, it maintains the broadest selection of MSC-certified (Marine Stewardship Council) species of any shellfish harvester globally. Its fleet and licenses have an estimated value of over $500 million.

Clearwater is planning to invest roughly $45 million in a third vessel for its clam business. The company is working to increase its access to supply by 60%. It will construct a new clam harvesting vessel and Clearwater expects this vessel to commence operations in 2015.

Clearwater recently expanded its value-added retail and foodservice offerings. It introduced six new seafood items: Reduced Sodium Shrimp, Split Lobster with Butter, Scallop Selects, Bacon Wrapped Scallop Selects, and two new flavors to its Scallops & Sauce line. Scallops & Sauce was chosen as one of the Top New Products of 2013 by the editors of Seafood International.

Clearwater is focusing on the increased demand for imported seafood in China. In 2013, it launched a branded range for the Chinese retail market. The company is working to increase available supply to tap into this growing market. This includes expanding its lobster operations.

2. High Liner Foods

High Liner Foods (TSX: HLF) is the top North American processor and marketer of value-added frozen seafood. It offers retail brands in grocery stores and branded products to restaurants and institutions. It also offers private label value-added frozen seafood products to North American food retailers and food service distributors. Its brands include High Liner, Fisher Boy, Mirabel, Sea Cuisine, Icelandic Seafood, FPI, Viking, Samband of Iceland, and American Pride Seafood.

High Liner is focusing on innovation in the foodservice arena. It recently announced an association with Diageo (NYSE: DEO), which involves the addition of a new line of seafood products for the U.S. foodservice market made with Guinness® stout. Diageo is the producer of Guinness® and this brand recently celebrated the 250th anniversary of the signing of the lease on St James’ Gate Brewery, Dublin.

In October 2013, High Liner Foods acquired the principal assets and operations of American Pride Seafoods from American Seafoods Group. American Pride is chiefly a value-added frozen seafood foodservice and scallop processing business. It processed over 7.0 million pounds of scallops last year. This acquisition enhances High Liner’s leadership position in the food service sector of the U.S. value-added frozen seafood industry.

High Liner received the Frozen Foods Processor of the Year Award for 2013, from Refrigerated & Frozen Foods Magazine. It received this award for its growth and industry leadership in sustainability, packaging, food safety, new product development and capital investment.

High Liner is concentrating on supply chain improvement and operating improvements. Its integration of American Pride Seafoods begins this quarter. This will contribute to economies of scale and cost reductions.

Foolish bottom line

These two seafood companies have strategies in place to take advantage of the global growth in seafood demand. Consumers’ tastes are changing, gravitating away from some meats to new and more healthful product offerings in the seafood category. Consider this trend when looking to tweak your stock portfolio.

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Fool contributor Michael Ugulini has no positions in any of the companies mentioned in this article.

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