Investopedia: Sanderson Farms Riding Investor Enthusiasm For Protein

Investors are certainly feeling a little more carnivorous these days, as optimism over improving prices and margins has pushed the shares of companies like Tyson (NYSE:TSN) to all-time highs. It certainly has hurt matters even slightly that Smithfield (NYSE:SFD) just bagged a takeout offer at a premium price as well. That leaves investors with a tough choice with the country's third-largest poultry producer Sanderson Farms (Nasdaq:SAFM). It's very difficult to goose the numbers high enough to make this stock look cheap on a long-term basis, but the near-term momentum could make selling today look like a chicken move.

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Investopedia: Can Hormel's Model Shine With The Drought?

Processed foods may not be healthy for us as consumers, but they certainly don't do the producers any harm. Whether you look at a five, 10 or 15-year chart, the performance of Hormel (NYSE:HRL) simply blows away the likes of Tyson (NYSE:TSN), Smithfield (NYSE:SFD) or Pilgrim's Pride (NYSE:PPC). Sure, some of that can be laid at the feet of superior management, but the reality is that it's much better to be the maker of branded processed foods than a virtual commodity supplier of fresh or frozen protein.

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Investopedia: Hormel Doing Better Than Most

These aren't easy times for food companies, as rising input prices push up costs and shoppers rebel against price increases. Hormel Foods (NYSE:HRL) seems to be holding up better than most, though, as the company's expense control and increased focus on processed/packaged goods pays benefits. Hormel looks like one of the best long-term stories in food right now, but the valuation means that investors shouldn't expect outsized capital gains from the shares.

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Investopedia: The Tyson Foods Story Still All About Optimism

Generally speaking, investors should look to own agricultural stocks when things are about as bad as they can get and can only go up. When it comes to Tyson Foods (NYSE:TSN) there are indeed some areas that are performing relatively poorly, but the question remains whether today's valuation really represents a low-risk/high-reward set up.

Trading Costs for Price  
Tyson posted some frankly blistering price increases for the fiscal first quarter. Reported revenue rose more than 9%, as the company traded a nearly 15% overall price increase with a 5% volume reduction.

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Investopedia: Don't Get Piggish With Smithfield Foods

Protein stocks can be some of the most irritating stocks for an individual to consider. So much of what determines success at companies like Smithfield (NYSE:SFD), Tyson (NYSE:TSN), and Pilgrim's Pride (NYSE:PPC) is out of their control and all but impossible to predict. What's more, successful trading often demands selling when things look great and buying when things are terrible - old advice to be sure, but nevertheless still hard for many investors to follow. 

With Smithfield Foods posting its first full-year profit in a few years, and the stock up nicely relative to the S&P 500 over the last two years, investors might be wise to question whether this is a stock they want to hold for the full cycle or whether it may be time to move on to greener pastures. While protein consumption seems to be on an inexorable climb around the world, agriculture is still unpredictable and protein stocks are still tough candidates for long-term sleep-well-at-night investing.

A Good End To The Year

Smithfield Foods certainly brought home some good results for the end of its fiscal year. Revenue rose more than 7%, as Packaged Meat pushed Pork Processing to a double-digit increase and offset weaker performance in Hog Production. One potential concern comes from the volume figures - across the board volume was weak, as fresh pork volume dropped 9%, packaged meat volume fell 2%, and hog production volume fell 9%.


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