$SEB - A diversified company that priortizes shareholder value

10 abr 2020

SEB is interesting to me for a lot of reasons. This isn't any sort of technical analysis.

First the company is very diverse. They have achieved near complete vertical integration in all of their businesses (pork, flour, sugar, alcohol, turkey, wheat, shipping etc.). Seaboard is also a very conservative company and is disciplined with capital allocation. They possess a strong balance sheet with high amounts of cash on hand at all times and keep debt levels to a minimum. The company has consistently repurchased its shares while increasing revenues and EPS, enriching shareholders. Also it is worth pointing out that the company is owned by the Bresky Family with approx 78% of shares outstanding. I like companies with disproportionately high insider ownership because it is demonstrative of value in many cases. Notice that Steve Bresky has not sold a single share since taking the helm 13 years ago. Many of the great companies over the years have maintained very high insider ownership (MSFT, AMZN, BRK.A etc.). Why sell out when you're getting rich? Something else Seaboard has in common with these companies is the fact that they pay essentially no dividend. I'd rather have the company buy back shares and reinvest in the business than return capital via dividends. Dividends erode value.

SEB does a lot of business in Africa and South America. For decades they have made significant capital investments in emerging countries and developed those operations into strong and sustainable cash flows. Many firms are not willing to take on the risk of investing in countries such as LIberia, DRC, Nigeria,Gambia, Ivory Coast, Guyana, Ecuador and so on. Governments can intervene and the political risks are always lurking. To me, the vertical integration in these operations significantly reduces the risks associated with such investments. They have near complete control of their entire supply chain.

I am an aggressive buyer of SEB at < $2800 per share.

Thanks,

Dr. Sabir