China Buys Lots of Pork

Crista Huff
Posted: May 30, 2013 12:01 AM
China Buys Lots of Pork

Stocks in the News is produced by Ransom Notes Radio and Goodfellow, LLC. Crista Huff manages Goodfellow LLC, a website that recommends outperforming stocks using fundamental and technical analysis. 

Stock number one is

Smithfield Foods Inc., (SYMBOL: SFD) and the headline says:

Shuanghui Agrees to Acquire Smithfield Foods for $4.72 Billion – Bloomberg

China's Shuanghui International has agreed to purchase Smithfield Foods for $4.7 billion in cash in order to fill a demand for pork in China, amid continued food safety scandals abroad.  Smithfield is the largest U.S. hog producer and pork processor.  Shuanghui will pay $34 per share to Smithfield shareholders, and assume the company’s debt.  The deal is subject to U.S. government approval.

We recommend that shareholders sell into the inflated share price and reposition their capital, rather than waiting for the deal to close.  If the deal falls through, shareholders can repurchase the shares as they revert back to a $25 to $27 trading range.

Our Ransom Note trendline says:  SELL SMITHFIELD FOODS.

SFD Chart

SFD data by YCharts

Stock number two is: 

News Corp., (SYMBOL:NWSA) and the headline says:

Murdoch aims to defy naysayers with new News Corp – Thomson Reuters

Rupert Murdoch’s News Corp. intends to separate into two companies on June 28.  Shareholders will receive shares of entertainment company 21st Century Fox, and publishing company News Corp.  The publishing company will have $2.6 billion in cash, no debt, a $500 million stock repurchase plan, and a dividend.

While the newspaper industry is dying in America, Rupert Murdoch points to his track record and adds, “there is opportunity everywhere.”  The company plans to aggressively pursue growth strategies, including digital media, and M&A activity.  S&P says, “We think the new  entity will emerge as a force for industry consolidation.”

News Corp.'s stock price broke out on January 2 and is up 29% year-to-date.  We told investors to buy this growth stock three times this year.

Our Ransom Note trendline says: BUY NEWS CORP.

NWSA Chart

NWSA data by YCharts

Stock number three is:

Michael Kors Holdings Ltd., (SYMBOL: KORS) and the headline says:

4Q Results Show Bull Case Playing Out – Morgan Stanley Research

Upscale accessories maker Michael Kors Holdings reported fourth quarter earnings of 50 cents per share, blowing away analysts’ estimates of 39 cents.  Sales were up 97 percent in Europe, where the company will add 40 new stores, and 52 percent in North America.  Gross margins for the quarter rose two full percentage points.

Wall Street expects earnings per share to grow 140% this year, although that number could be revised upward near-term.  The PE is 34.

Michael Kors stock has had a two-steps-forward-one-step-back approach since going public in late 2011, and appears ready to begin a new climb.  Expect the stock to trade between $61 and $65 in the very near-term.

Our Ransom Note trendline says: BUY MICHAEL KORS HOLDINGS.

KORS Chart

KORS data by YCharts