Cal-Maine: egg company Buffett may like?

Posted in :

Reading Time: 2 minutes

Amid the terrible market and paper loss in my brokerage account, I was doing some soul search: general market condition aside, what went wrong in my investments; new ideas?

I came across this Cal-Maine foods from the latest Barrons, Egg Fight: The Yolk’s on the Shorts. We all know the egg price went up quite a bit recently, so as the stock of Cal-Maine (Nasdaq: CALM). From July 6 2007 to July 3 2008, the stock was up 75%.

eggs back light pic

So I went to Cal-Maine Investor Relationship web site and started reading. Some interesting facts from reading its fiscal 2007 annual report, and its investor presentation.

1) The company was majority owned by its Chairman and CEO Fred Adams.

2) It has 15% of the US egg market share, and is still growing by acquisition.

3) It has a new varible dividend policy which will allocate 1/3 of net income to dividend each quarter. The latest quarterly dividend was 81 cents! Again, the high egg price was the main reason for higher net income.

My take

As said in the annual report and the presentation, the main uncertain factor affecting future earning is the egg price. I found USDA has some statistics and projections.

Data set usage example: commodity “egg”; attribute “consumption”, “egg, farm” or “production”; year 2008 or 2007; click on “Run query”.

But just as the stock goes, one can not predict the future from the past, otherwise historians and statisticians will all be great investors.

The Barrons article can be seen here. (Yahoo Message Board)

%d bloggers like this: