Diamond Foods (NASDAQ: DMND)
, Dole Food Company (NYSE: DOLE)
and Boston Beer Co (NYSE: SAM)
are the three food or beverage stocks with highest amount of short interest of any stock. Specifically and according to HighShortInterest.com
, Diamond Foods (DMND) has short interest of 39.2%, Dole Food Company (DOLE) has short interest of 37.42% and Boston Beer Co (SAM) has short interest of 35.48%. However, the shorts don’t always turn out to be right and two of these three stocks still have gains for the year and over he past five years. So who will ultimately choke on food or beverage stocks Diamond Foods (DMND), Dole Food Company (DOLE) and Boston Beer Co (SAM) – investors or the shorts? Here is a closer look to help you decide:
Diamond Foods (NASDAQ: DMND): May (Or May Not) Avert a Pearl Harbor on December 7th (But At Least We Know its Coming)
Diamond Foods is a packaged food company focused on building, acquiring and energizing brands with processing, marketing and distributing snack products and culinary, in-shell and ingredient nuts being specialties. Yesterday, hedge fund Litespeed Management LLC disclosed a 7.66% stake in the company with its share count up 25.34% since the quarter ended June 30, 2012 plus a few days ago, the company got an extension until December 7th to become current in its filing of financial statements. Diamond Foods’ problems go back to February when the company ousted both its CEO and CFO after an internal investigation revealed improper payments to walnut growers and then the company was forced to restate its 2010 and 2011 earnings after a SEC probe plus suspend its dividend. Those scandals cost Diamond Foods the Pringles brand which the company was going to buy from Procter & Gamble (NYSE: PG)
in a $1.5 billion all-stock deal that would have made DMND the second biggest snack foods company. For me, I would not touch a stock a stock with dodgy management (sure the heads at the top rolled but what about the minions at the bottom who made the payments?) and that’s about to be banished to the over-the-counter market but perhaps Litespeed Management LLC knows something that the shorts don’t know (or they have more money than you or I and don’t mind the risk….) On Thursday, Diamond Foods rose 0.05% to $18.95 (DMND has a 52 week trading range of $16.15 to $84.69 a share) for a market cap of $418 million but the stock is down 41.3% since the start of the year and up 5.45% over the past five years.
Dole Food Company (NYSE: DOLE): The Shorts May Be the Ones Who Choke
Dole Food Company is a producer, marketer and distributor of fresh fruit and fresh vegetables including packaged fruit products, packaged salads and fresh-packed vegetables. On Thursday, Dole Food Company rose 2.48% to $14.07 (DOLE has a 52 week trading range of $8.02 to $15.19 a share) for a market cap of $1.25 billion plus the stock is up 62.7% since the start of the year and up 14.6% over the past five years. Moreover and just last week, the S&P reaffirmed its “B” rating on Dole Food Company and revised its outlook from developing to positive with the possibility of an upgrade over the next year. That’s because Dole Food Company’s has announced an agreement to sell its worldwide packaged food and Asia fresh produce businesses with nearly all of the $1.7 billion in proceeds to be applied toward debt reduction. Nevertheless, Dole Food Company will still face a whole host of uncontrollable factors associated with the food commodities business but the company is less dependent on volatile bananas sales than competitors (29% of 2011 sales with a possible rise to 1/3rd after the divestiture). Hence, I think the shorts will continue to turn out to be wrong on Dole Food Company as it gets its financial house in order.
Boston Beer Co (NYSE: SAM) Recently Got Hit With Higher Barley Prices
Boston Beer Co is a craft brewer in the United States. On Thursday, Boston Beer Co rose 3.94% to $113.70 (SAM has a 52 week trading range of $71.00 to $128.07 a share) for a market cap of $1.47 billion plus the stock is up 4.7% since the start of the year and up 144.5% over the past five years. However, Boston Beer Co had spiked as high as the $124 level over the summer before coming back down to earth but it still has a rather high trailing P/E of 27.48 and a forward P/E of 24.09. Back in August, Boston Beer Co missed Wall Street expectations thanks to higher barley costs hitting margins – sending shares down. Of course, the price of barley inevitably fluctuates in either direction and what’s important is whether or not consumers are still drinking craft beers. Likewise, it does seem like everyone else (and their mother’s uncle) is brewing or trying to brew craft beers. Hence, the shorts may be betting that eventually all of that competition (and not barley prices) will hit Boston Beer Co beer where it hurts but the jury is still out on that with the next set of earnings not due out until October 29th. The Bottom Line
. As an investor, I’d be staying away from Diamond Foods (DMND) while Dole Food Company (DOLE) seems to be on the right track while I am not so sure if Boston Beer Co (SAM) is really worth its P/E as consumer tastes could change or go foe the competition.