J.M. Smucker: Back up the truck

Posted Dec 4th 2009 3:00PM by Joseph Lazzaro
Filed under: Stocks to Buy

As noted earlier, The J.M. Smucker Company's (SJM) low-profile status on Wall Street in no manner takes away from its solid business model, which is one reason I'm reiterating my buy rating for the company's shares, first recommended on May 29, 2009 at a price of $40.26. If you bought SJM in May, you're up an impressive 47%.

J.M. Smucker's positives include diverse revenue streams in it spreads/foods businesses, and a star, national coffee brand (Folgers). Cost containment remains good. A tie-in with Wal-Mart (WMT) adds to the positive mix, and there's ample room to increase international sales, which accounted for only 11% of revenue in FY2009. The First Call FY2010/FY2011 EPS estimates for SJM are $4.08 to $4.31.

Techincally, J.M. Smucker's stock chart looks beautiful – an uptrend that recently gapped-up and has tested psychological resistance at $60. Short-term, SJM is slightly overbought, so wait for a pull-back to $55-57, to buy shares. And look for an SJM price north of $75 in 2010.

Stock Analysis: The J.M. Smucker Company 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 on a pull-back to $55-57, if given the chance; keep in mind that SJM may not retreat to that level. Then buy another 25% in one month, if U.S. economic conditions don't worsen substantially. Under any circumstance, don't buy more than 75% of your SJM position before February 2010. Sell/Stop Loss if you were to buy shares in this company: $39.

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

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