EOT Trade Alert – October 2, 2012

| October 2, 2012

October 2, 2012

Trade Alert:

  Buy BGS February 2013 $30 Calls at $3.20 or better

Company Background:

B&G Foods (BGS) and its subsidiaries engage in the manufacture, sale, and distribution of shelf-stable foods in the United States, Canada, and Puerto Rico.  They offer shelf-stable Mexican food, including taco shells, tortillas, seasonings, dinner kits, taco sauces, peppers, refried beans, salsas, and related food products.  BGS also distributes maple syrups, gourmet salad dressings, sugar free syrups, marinades, fruit syrups, confections, and pancake mixes.  The company distributes its products through a network of independent brokers and distributors to supermarkets, mass merchants, warehouse clubs, wholesalers, specialty food distributors, military commissaries, and non-food outlets.

Short-Term Catalyst:

You want something to buy here?

How about taking part in the 3.63 million share offering by B&G Foods (BGS)?

Here’s a little company that has been one of the biggest wins I have seen in the last few years.  A company that time and time again buys old-line, sleepy brands and revitalizes them.

CEO David Wenner has accumulated a terrific portfolio of quiet entries.  Brands like Vermont Maid, Cream of Wheat, Regina salad dressing, Ortega and Las Palmas Mexican foods, and of course, the namesake B&G pickles.  Over the last few months, he’s recently expanded into household products, buying castoffs Scotch Guard and Static Guard, as well as Mrs. Dash, Sugar Twin, and Molly McButter from Unilever (UN).

These little brands didn’t move the needle for a giant like Unilever.  But they do remarkable things for the bottom line of B&G.

So now what for this mid-sized company?

Just last month, Wenner struck again buying New York Style and Old London from an outfit called Chipita America for $62.5 million in cash.  You may not know those names, but their brands are quintessential American staples (Bagel Crisps and Panetini Toast).

Maybe you had one of these tasty items for breakfast this morning?

With this acquisition, B&G now has a major toehold in the growing healthier snack category.  Plus, once B&G’s in, it does profitable line extensions and very quickly monetizes its buys.

And I believe this time will be no different.

Bottom line…

Wenner likes to strike quickly with cash deals and then follows up with equity offerings.

Just like the one he announced today.  It’s a terrific and winning formula that he has done again and again, taking the stock from $2 in 2008 to $30 now.

To me, this is a great opportunity to take some stock down at a discount.  You don’t get much of one usually, and when you do, you have to take advantage of it and buy.

So let’s get in on this 3.65 million share deal by buying some call options.

The company will be stronger after it!  And it should continue its pattern of under-the-radar growth going forward.

This is exactly what you want in this rising market.

Trade Details:

Underlying Stock Symbol: BGS
Current Bid-Ask Price: $2.75 – $3.20
Option “Buy Up To” Price: $3.20
Break-Even On Stock At Expiration: $33.20
Maximum Risk Per Contract: $320


Exit Strategy:

BGS is trading at $31.95 per share.  Resistance levels will be at $33.50 and again at $35.00.  Don’t forget, we want this stock to move higher.  Support levels will be at $29 and $28.  Conservative investors should look to exit at the first support or resistance level.  Aggressive investors may want to hold for a bigger move.



Category: EOT Trade Alert

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