J.M. Smucker (SJM) Jamming To New Highs As It’s Poised To Benefit From New Post-Pandemic Habits
3:22 pm Wednesday, December 28th, 2022
J M Smucker (SJM) has been jamming to a slow and steady beat in recent months, trading to a new all-time high yesterday. The company held a bullish Investor Day in mid-December, which seems to have been a recent catalyst for the stock. With tech stocks out of favor, investors have been rotating into high quality food & beverage names for safety. SJM is a consumer goods company, its brands include Smuckers, Jif, Folgers, and Milk-Bone.
The company splits its revenue segments into US Pet Foods (~35%), US Coffee (~31%), and US Consumer Foods (~23%). International / Away From Home makes up 13%. SJM has positioned itself in three of the most attractive and resilient categories in the food space. We commend SJM for reshaping its portfolio with four divestitures over the last two fiscal years to focus on higher growth areas. That includes the sale of its natural beverage and grains businesses; its private label dry pet food business; the Natural Balance premium pet food business; and maybe the highest profile was its 2020 sale of Crisco oils and shortening to B&G Foods.
At its recent Investor Day, the company did a great job breaking down how the consumer has changed since the pandemic. The pet category is benefitting from more pets and pet parents than ever. Dog and cat ownership have both increased by 10% since 2019, which means 5 mln new households for each. Besides the raw numbers, pet parents are increasingly viewing pets as true members of the family.
Overall, SJM may not be as exciting as high-growth companies or companies with cutting-edge technology, but its boring business may be worth a look as a hedge against the weakness in tech stocks as we approach 2023. The pandemic has created many new habits for consumers that should benefit many of SJM’s product categories. Finally, SJM pays a healthy 2.6% dividend yield.
