By Timothy Lutts, Chief Investment Strategist and Editor of Cabot Stock of the Month Report
From Cabot Wealth Advisory, 11/23/09. Sign up for free Cabot Wealth Advisory e-newsletter
Milk consumption is growing in Russia as the standard of living improves, and that means growth for this large Russion dairy producer.
Wimm Bill Dann Foods (WBD) was founded in 1992, it's headquartered in Russia, and it has annual revenues of $2.4 billion. It has 34% of the dairy market in Russia and 20% of the fruit drink market. Additionally, 7% of revenues come from outside Russia.
Most important is that the company is well managed by Russian and non-Russian managers, who know how to grow a business by simple acquisition. Since 2000, the company has grown revenues every year. 2008 growth was 16%.
This year, as business was hit by both the global recession and the devaluation of the ruble, sales were down 29% in the first quarter and 27% in the second. But the company cut costs and as a result, second quarter earnings grew 48% from the year before, while the after-tax profit margin soared to an unheard-of (for a milk company) 9.4%.
Finally, the stock has been strong, suggesting that investors who are looking beyond the present see continued growth for the company. In fact, third quarter earnings will be released tomorrow morning, November 24, before the market opens. If the market likes the numbers and the stock trades up on good volume, I think you can buy it.
Editor's Note: Cabot China & Emerging Markets Report bought WBD at a split-adjusted price of 15 in January 2007 and sold it in August 2007 at 24 for a 55% profit. After dropping as low as 3 last November, WBD has made a powerful recovery, although a four-for-one split just last week might signal a short-term high. For continuing, timely coverage of the volatile world of emerging market stocks, a no-risk trial subscription to the Cabot China & Emerging Markets Report (the #1 investment advisory for the last five years, according to Hulbert Financial Digest) can give you the inside track. Technically, you could buy it here; the chart is positive. But ideally, you'll want to wait for a lower-risk entry point, particularly since the broad market is now less supportive. Click here for more information on Cabot China & Emerging Markets Report.
Timothy Lutts
President, Chief Investment Strategist, Editor of Cabot Stock of the Month
Timothy Lutts heads one of America’s most respected independent investment advisory services, publishing eight newsletters to more than 165,000 subscribers around the world. Tim leads a dedicated team of professionals who serve individual investors with high-quality investment advice based on time-tested Cabot systems. Under his leadership, Cabot has been honored numerous times by both Timer Digest and the Hulbert Financial Digest as among the top investment newsletters in the industry. Tim also edits Cabot Stock of the Month.