Position Close Update: John B. Sanfilippo & Son, Inc. (JBSS)

David Trainer  |

John B. Sanfilippo & Son, Inc. (JBSS: $63/share) – Closing Long Position – up 7% vs. S&P up 4%

John B. Sanfilippo & Son was originally selected as a Long Idea on 11/1/17. At the time of the initial report, the stock received a Very Attractive rating. Our long thesis highlighted a shift towards branded foods driving market share growth and improvement in margins

During the 383-day holding period, JBSS outperformed as a long position, gaining 7% compared to a 4% gain for the S&P 500.

JBSS was downgraded to Neutral on 11/3/18 after the company’s latest earnings report raised a number of questions about our original thesis

The company’s net operating profit after tax (NOPAT) margin has shrunk from 4.7% when we published our article to 3.9% over the trailing twelve months. Operating expenses increased 31% year-over-year in the most recent quarter compared to a 5% revenue decline.

Meanwhile, market share for the company’s key brands has declined slightly over the past year, in contrast to several prior years of market share improvement. The introduction of a store-brand competitor has reduced available shelf space and led to sales declines.

These two issues raise enough questions that we no longer have confidence in the long-term competitive advantage of the business. As a result, we are closing this position.

Figure 1: JBSS vs. S&P 500 – Price Return – Successful Long Call

Image Source: New Constructs, LLC

Sources: New Constructs, LLC and company filings

Note: Gain/Decline performance analysis excludes transaction costs and dividends.

This article originally published on November 20, 2018.

Disclosure: David Trainer, Kyle Guske II, and Sam McBride receive no compensation to write about any specific stock, style, or theme.

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DISCLOSURE: Disclosure: David Trainer, Kyle Guske II, and Sam McBride receive no compensation to write about any specific stock, style, or theme.

The views and opinions expressed in this article are those of the authors, and do not represent the views of equities.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please go to: http://www.equities.com/disclaimer



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