TSN Stock Has Become a Strong Growth and Value Candidate. Just Ask Jim Cramer
I made some good profit on Tyson Foods, Inc. (TSN) call options in August, then moved on to other stocks, leaving Tyson as a distant, pleasant memory. Then I read some comments this week from Jim Cramer, host of CNBC’s Mad Money, that shoved Tyson Foods stock back into the forefront of my mind.
Tyson Foods is a diversified food products company with operations in 20 countries. Tyson produces chicken, beef, pork and prepared food products under brand names that include Tyson, Jimmy Dean, Hillshire Farm, Sara Lee, Ball Park and more. The company is in a position to benefit from the ongoing problem of African Swine Fever (ASF) in China and surrounding countries, which has devastated China’s hog population, cutting it by at least 50% since 2018. People are going to need to find alternate protein sources, and Tyson is prepared to capitalize on that need.
Let’s just take a walk through my thought processes on Tyson Foods in July and August, because I think you can also profit from owning TSN shares (or call options) in the very near future.
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Why Tyson Foods Stock?
I’m constantly doing stock research, reviewing at least 1,100 stocks on a regular basis, looking for financially fit and growing companies. In that light, I read a Wall Street research report on food stocks in early July. What stood out was that Tyson Foods stock had more Wall Street buy recommendations than any of the other 34 U.S. food stocks in the report. So I took a look at Tyson Foods stock.
At that time, the company was projected to see profits fall 3.6% in 2019 and rise 11.6% in 2020, as measured by earnings per share (EPS). Tyson operates on a September fiscal year. When we’re in a company’s fourth fiscal quarter, I disregard current-year earnings projections and instead focus on next year’s consensus earnings estimates. EPS growth of 11.6% is not exciting, but also not boring. It was a decent number, enhanced by the 1.8% dividend yield (in mid July) and 2020 price/earnings ratio of 12.3. I was seriously impressed to learn that Tyson’s annual dividend increases have ranged between 25%-50% in the last three years.
Even though the company did not offer quite enough EPS growth for me to recommend TSN stock to investors, I was curious enough to glance at the price chart, and that’s when I became sold on capital gain opportunities with the stock. By mid July, the stock had traded sideways for 2.5 months, and the trading range kept narrowing in a beautiful chart pattern (seen above) that bodes well for a near-term breakout.
I was itching to capitalize on the next run-up in the share price, which I was sure would happen quite soon, so I bought call options on TSN on July 24. Then on August 5, the company reported a great third quarter and the stock roared upward. As bad luck would have it, the broader stock market began a big downturn on that precise day. I made a quick decision that the market was not going to provide the stability that TSN would need to sustain that day’s share price run-up, and I sold my call options that day for 27.8% profit.
Then, I forgot about Tyson, until this week.
Jim Cramer discussed the recent, amusing chicken sandwich wars between Chick-Fil-A, a privately-owned company, and Popeyes, a subsidiary of Restaurant Brands International (QSR). Cramer said that the way to capitalize on the chicken sandwich publicity was to own shares of Tyson Foods stock. Ding! Ding! Ding! And with that, TSN landed back on my radar, because that was a great idea.
Buy TSN Now
At this point, Wall Street’s consensus earnings estimates for Tyson have increased to reflect 17.2% EPS growth in 2020. That’s a very attractive number! The P/E is low in comparison at 13.0, and the dividend yield is now 1.6%.
This large-cap stock could appeal to growth investors, dividend-growth investors, and momentum investors. TSN rose past long-term price resistance at 82 in August, to new all-time highs, despite a pullback in the broader market that affected just about every stock that you own. That means TSN has a lot of strength.
When U.S. stocks recover in the coming weeks, TSN is likely to lead the pack. Buy Tyson Foods stock now before the run-up kicks into high gear.