Pitfalls Everywhere

Pilgrims Pride files for bankruptcy protection citing higher supply (read grains) costs. We were looking at consumer staples and for companies that demonstrated financial stength with a product that consumers would seek out in a tough economy coupled with a brain trust of whales like Cohen so PPC popped up on our radar.

Here's a company on a run rate in '08 to produce nearly 16% revenue growth y/y but a gross profit that may have been cut in half and operating income that went negative. COGS simply soared representing 97.5% of revenues in the quarter ending 6/28/08 vs 88.8% in the same quarter of 2007. For a low margin business like chicken and eggs, the sky might as well have fallen.

Once again I'm glad that technical prowess staved off a purchase. Proof positive that buying from strength and not the bargain bin offers up the higher odds for success.