Tupperware continues to race ahead

Posted Nov 11th 2009 5:40PM by Joseph Lazzaro
Filed under: Stocks to Buy

Tupperware's (TUP) stock performance is a case study in institutional investor (II) strategy, which is why I'm Reiterating my Buy rating for the company, first recommended on April 28, 2009 at a price of $23.48.

If you bought Tupperware in April, you're up an astounding 105%. The reason? IIs are looking past TUP's likely 2-4% revenue decline for 2009, to a probable double-digit revenue gain in 2010. In other words, the big players in the market are already well into 2010. That's the stance typical investors should take as well - always thinking about conditions 6-9 months ahead - if you'd like your stock portfolio to surge.

Tupperware's food storage container business fits nearly perfectly into the U.S. 'frugal consumer' trend, in which millions of cash-strapped, budget conscious Americans will be eating more meals at home, leading to leftovers. Translation: long-term uptrend in food container sales.

Meanwhile, the integration of the Sara Lee direct selling line appears to be going well. A 100-nation global footprint and a large retail salesforce adds to the positive story. The rising cost of resin is a concern, but it's not enough to negate the Buy rating: 'dinner-in' will be 'in' for at least the next 3-4 years in the U.S., probably longer. The First Call FY2009/FY2010 EPS estimates for TUP are $2.90 to $3.44.

Place a 20 multiple (20x) on that FY2010 EPS of $3.44 and Tupperware should trade close to $70 in 2010.

Technically, Tupperware's stock chart is beautiful: a staircase, with only minor, constructive corrections, and a price that rarely touches the key, 50-day moving average - a sign that institutional investors are adding to their TUP positions. TUP will encounter psychological resistance at $50, but this will prove to be a pit stop. Tupperware's shares are headed north.

Finally, the Sell/Stop Loss has been raised to $24, or to just above cost, from $14. Hence, this is a zero-risk trade for your April-bought shares.

Stock Analysis: Tupperware is a moderate-risk stock. If you've already purchased the company's shares, hold them. If not, consider buying a 50% position in TUP now. Revised Sell/Stop Loss if you bought shares in this company: $24.

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

Tags: TUP, Tupperware Corp.