Food stocks such as Maple Leaf Foods (TSX: MFI) may not be the most interesting or exciting investments to make, but they make some of the best long-term plays on the market. Here’s a look at some of the reasons why Maple Leaf makes a great long-term investment for your portfolio.
A growing behemoth
While most of us will recognize the iconic namesake brand of the company, few people actually realize the full scope of brands that Maple Leaf owns, many of them just as prominent as Maple Leaf brands including Shopsy’s, Schneiders, Swift, Larsen, Prime, and others.
Interestingly, Maple Leaf has expanded into new areas and markets in recent years, such as its venture into the U.S. market through the acquisition of the plant-based food company Lightlife foods.
Acquisitions have become more of the norm for Maple Leaf Foods, and as the company continues to expand its portfolio, so too does its growing hold over the market. By example, in the most recent quarterly update, Maple leaf announced the closing of a $215 million deal for VIAU foods – a market leader in premium Italian cooked, dry-cured and charcuterie meats. VIAU provides those meat products to both the foodservice industry as well as to retailers across the country as well as in the U.S.
Rebranding for the future
One of the things that really impressed me recently has to do with Maple Leaf’s rebranding. As testament to both the changing nature of consumer tastes as well as the need for greater sustainability, Maple Leaf completely revamped its product line in terms of both ingredients and packaging over the past year. Gone are both the unreadable preservatives, colours, sweeteners, and chemicals in tiny print from its products.
In its place are simple, larger, easy-to-read ingredients and a revamped menu free from the chemicals and preservatives that consumers are attempting to remove from their diets.
Results and opportunity
Maple Leaf announced results for the third quarter last month, which saw sales dip 3.7% when compared to the previous period last year, coming in at just $874.8 million. Much of that dip was attributed to both the IFRS15 reporting standard as well as the acquisitions completed within the quarter.
Net earnings for the quarter dropped to $26.6 million, or $0.21 per basic share from the $37.6 million, or $0.29 per basic share reported in the same period last year.
Despite the drop, Maple Leaf did realize growth across value-added pork and poultry as well as in plant proteins, but that growth was offset by volatility in hog pricing and through various investments aimed at supporting long-term growth, such as the rebranding mentioned above.
While the results came in lower than the previous period, many of the reasons for that drop were temporary or one-time events that have no bearing on the long-term forecast over the stock, which leads to an investment opportunity in the form of the currently discounted share price.
Currently, Maple Leaf trades at just over $29, having dropped nearly 9% in the past month. If that weren’t reason enough to consider a small position, then the quarterly dividend that pays out a respectable 1.75% may sway some investors.
In my opinion, Maple Leaf remains a great long-term investment for those investors looking to diversify their portfolios with a solid, if not defensive stock that is only going to grow in the years ahead.
