Buy This, Not That: A Turkey Worth the Stuffing

Shah Gilani|November 27, 2024

I’ve got a juicy Thanksgiving edition of Buy This, Not That for you today.

There are two major players in the turkey game…

One’s a household name that is synonymous Thanksgiving, but its parent company’s stock is laying an egg faster than you can say “stuffing.”

Meanwhile, there’s another turkey powerhouse that might surprise you…

The company’s not just about chicken… and it comes with a side of a tasty dividend yield.

It could be the turkey play you’re looking for this holiday season.

Discover which bird is worth stuffing into your portfolio and which one should stay in the freezer in my latest Buy This, Not That episode.

Click on the thumbnail to dive in.

TRANSCRIPT

Hey, everybody. Shah Gilani here with your weekly BTNT. Because it’s Thanksgiving week, we’re going to talk turkey today.

Turkey, specifically, because Butterball is the name everyone thinks of when it comes to Thanksgiving turkeys. And Butterball is an LLC that is 50% owned by a giant agribusiness company called Seaboard (SEB).

So Seaboard owns 50% of Butterball, the best-selling holiday Thanksgiving turkey in America, which hits it out of the park. But Seaboard, as an agribusiness, doesn’t even get to first base.

So I’m going to tell you right up front, Seaboard, yes, in spite of Butterball turkeys selling 60-something million pounds on and around Thanksgiving is NOT a buy.

In fact, it’s a sell. The stock has plummeted. It’s down 40% from its all-time highs, and it’s expensive. It’s not expensive in P/E terms, because the P/E is 12.39. That’s the trailing P/E. Pretty cheap. But the stock is expensive at $2,636. We’ll call it $2,650.

The profit margin is negative 0.02. Here’s an $8 billion-plus revenue company that loses money, with that profit margin being negative. I don’t care how many Butterball turkeys they sell.

If Butterball was a standalone, we’d probably want to buy it. That’s it. Even though it’s more of a seasonal play. Seaboard is a big agribusiness company, but they just can’t get their act together. Stock is down, like I said, 40%. Back in April 2022, the stock was almost $4,400.

It’s come straight down, and I don’t see it creating a base here. There’s no reason to buy Seaboard here. Surely not for the turkeys because, frankly, it is a turkey.

On the other hand, a giant turkey seller and lot more, you might know them more for chicken, is Tyson Foods(TSN).

Tyson is the largest all-around meat, prepared and processed frozen food company in America by far. Yes, turkeys are huge for Tyson. So is chicken, but they also do beef and pork. And if there’s anything that’s related to processed or packaged meats in that whole area, in your grocery store, Tyson probably has a hand in some part of its creation or its distribution or some aspect of it. That’s how big Tyson is.

Tyson’s revenue – to compare to Seaboard’s revenue of a little over $8 billion – is $53 billion, at least in the trailing 12 months. Hopefully more in 2025. Profit margin is paltry… or is that poultry? It’s at 1.5%, but they make money. Their EBITDA is $3.14 billion. Net income available to common shareholders is $800 million, and they pay a dividend. At least you get paid something to hold the stock. A 3.14% dividend yield on Tyson.

Now, the stock – hanging around $63 and change – is just off its recent high of $66. So I like Tyson. Stock’s going in the right direction.

And I think if they can expand their profit margin, they can go a lot higher.

So, yes, for Thanksgiving Day, enjoy yourself some Tyson turkey.

Not Butterball… because your Tyson stock’s going to go up, and your Seaboard stock’s probably going to do what it’s been doing – a lot of nothing.

That’s it. Happy Thanksgiving, everybody. I’ll catch you guys next week. Cheers.