J.M. Smucker reels-in profits, quietly

Posted Sep 23rd 2009 5:40PM by Joseph Lazzaro
Filed under: Stocks to Buy

The J.M. Smucker Company (NYSE: SJM) is one of those plays that doesn't get a whole lot of media coverage, but that in no way takes away from the company's solid business model.

Earlier, I noted SJM's diverse revenue streams in it spreads/foods businesses, and more-recently its coffee (Folgers) business. Moving forward, include cost containment in the list of positives: JSM should benefit from a drop in commodity/ingredient costs.

Hence, I'm reiterating my Buy rating for SJM, first recommended on May 29, 2009 at a price of $40.26. If you bought SJM then, you're up about 30%.

Further, investors should keep in mind that SJM is largely domestic-based: international business accounted for about 11% of FY2010 revenue. That suggests an opportunity to broaden brand appeal overseas, should the company choose to explore that option.

The Sell/Stop Loss has been raised to $39, or just below the entry point, from $22. The First Call FY2010/FY2011 EPS estimates for SJM are $3.83 to $4.09.

Stock Analysis: The J.M. Smucker Co. is a moderate-risk stock. If you've already purchased the company's shares, hold them. If not, consider buying a 25% position in SJM now; then buy another 25% in three months, if U.S. economic conditions don't worsen substantially. Under any circumstance, don't buy more than 50% of your SJM position before December 2009. Revised Sell/Stop Loss: $39.

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Disclosure: Lazzaro has no positions in stocks, but does own shares in two Pimco Bond Funds: PHDAX and PYMAX.

Tags: J.M. Smucker Co., jam, SJM, spread