JBSS
Who are they?
John. B Sanfilipino & Sons (JBSS) is a processor and distributor of mixed nuts in the U.S. They sell their products under several brands and also package private label products for numerous grocery chains. It has a market cap of around $1 billion and pays a dividend of 0.85% as well as regular special dividends.
The company has been increasing their ROIC from the low teens in 2018 to 20-21% in the last few years. They have low amounts of debt ($36 million) and have increased earnings at a 11.6% CAGR since 2013.
Their CEO has been in the position since 2016, and with the company since 1991. It is safe to say he is intimately familiar with the company. In fact, Jeff Sanfilipino is the 4th generation of his family to head the company. He also owns about $1.6 million worth of company stock. It is safe to say his interests are aligned with the company.
Why is this a good company?
The company has consistently grown their ROIC for a long time. They have grown the business through occasional acquisitions, as well as organic growth. The biggest driver of their growth has been increased consumer sales. Nuts offer some of the healthiest vegan protein and changing diets can be a growth driver. This grew 9% last year.
They also provide private label packaging for stores, which grew at 7% and commercial ingredients, which grew at 29%. This is their biggest growth segment right now.
THey are trying to diversify into snack foods, as opposed to just nuts. They recently acquired the Orchard valley brand which produces mixed nuts and dried fruits. In the US, snack foods are a $108 billion market, and JBSS is looking to get into a healthy corner of that market.
Some downsides…
This is a no moat business. There is nothing to keep a consumer from eating Planters instead of JBSS. They do have contracts for their private label manufacturing, but I don’t think that enough to be a moat.
They sell an agricultural product, so there are also risks of commodity price fluctuation, or crop disruption. I’m not qualified to weigh in on how likely these things are, but this company has been in business since 1922, so they have a history of surviving hard times.
Also, according to their 10K they do have significant customer concentration. 63% of sales are to their 5 largest customers. My understanding is that this has to do with the nature of food distribution companies. They are trying to do more DTC sales, but that's not likely to be a big part of their business.
Conclusions
I do not have a position in this company. There are not many defensive companies that can put up 15%+ ROIC for a long time. JBSS does it. They return a large amount of that cash to shareholders through dividends, but also improve their business. There is almost no analyst coverage of this name, so it tends to fly under the radar. There is no forward p/e because there are no estimates. In my opinion the company is around fair value, with potential to compound if it is able to grow in the snack food market.
Leave a Reply