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(B)(N) Annie’s Incorporated

December 12, 2013
Courtesy: Annie's Incorporated

Courtesy: Annie’s Incorporated

Deal Book. “Stocks” are products too and one way to make a few hundred million from a few million is to buy a tony brand with a niche market; build a nifty website; and sell, sell, sell the product that it makes to grocery stores and the “product” that it is to mutual funds.

No doubt there is much more to this story – and it might be an organic growth story at the end of the day – but what we know of it might explain the mystery of a “branded stock” that pays no dividends and has sales of less than $200 million per year and an operating profit margin of 12% or so in a very tough market – bespoke “foods” – but “floats like a butterfly and stings like a bee” (Muhammad Ali vs. Sonny Liston 1964) in the “stock market” at $700 million or so and up +150% from $300 million in its debut offering of  March 2012 (The Street, December 10, 2013, Saintvilus: Is Annie’s Too Hot or Just Right? and The Wall Street Journal, March 28, 2012, Hot Debut: Annie’s IPO Jumps 89%).

"Floats like a butterfly and stings like a bee"- Muhammad Ali 1964

“Floats like a butterfly and stings like a bee”
– Muhammad Ali 1964

The story begins with an SEC Form D “Notice of Sale of Securities” for $31 million to Solera Capital LLC and several individuals in Annie’s Incorporated (formerly Homegrown Naturals Incorporated) and is picked up again by institutional interests including TimesSquare Capital Management LLC (Schedule 13G 8.2% or 1,399,070 shares of 17,122,000 common shares for the company) in December 2012 and several other SEC Schedule 13G “Beneficial Ownership” filings thereafter so that in September of this year 54% of the company was owned by just seven “institutions” including two banks, two mutual funds and three LLCs and when they trade the stock it’s typically in blocks of several hundred thousand shares.

Maybe this is a “knockout” company. We don’t know but it became eligible for inclusion in the Perpetual Bond™ at $42 in April and to win, we have to play.

Our estimate of the downside risk in the stock price due to the demonstrated volatility in the stock price is minus ($5) per share in the next quarter so that it could be trading from its current price of $45 between $40 and $50 without surprise. Please see Exhibit 1 below.

Exhibit 1: (B)(N) BNNY Annie’s Incorporated – Risk Price Chart

(B)(N) BNNY Annie's Incorporated

(B)(N) BNNY Annie’s Incorporated

Annie’s Incorporated is engaged in the production, marketing, and distribution of natural and organic food products. Its product line comprise of meals, snacks, dressings, condiments, and other products.

(Please Click on the Chart to make it larger if required.)

From the Company: Annie’’s Incorporated engages in the production, marketing, and distribution of natural and organic food products. It offers approximately 135 products comprising meals, snacks, dressings, condiments, and other products, including macaroni and cheese, snack crackers, fruit snacks, and graham crackers under the Annie’s Homegrown and Annie’s Naturals trademarks. The company sells its products directly, as well as through distributors to the mainstream grocery, mass merchandiser/other, and natural retailer channels in the United States and Canada. Annie’s, Inc. was founded in 1989, has 100 employees, and is headquartered in Berkeley, California.

For more information and additional references to the theory, please see our recent Post, The RiskWerk Company Glossary.

And for more on what risk averse investing has done for us this year, please see our recent Posts on The S&P TSX “Hangdog” Market or The Wall Street Put or specialty markets such as The Dow Transports & Utilities or (B)(N) The Woods Are Burning, or for the real class actionLa Dolce Vita – Let’s Do Prada! and It’s For You, Dear on the smartphone business.

And for more stocks at high prices, The World’s Most Talked About Stocks or Earnings Don’t Matter – NASDAQ 100.

And for more on what’s Working in AmericaBig OilShopping in America or Banking in America, to name just a few.

Postscript

We are The RiskWerk Company and care not a jot for mutual funds, hedge funds, “alternative investments”, the “risk/reward equation” and every other unprovable artifact of investment lore. We have just one product

The Perpetual Bond
Alpha-smart with 100% Capital Safety and 100% Liquidity
Guaranteed
With No Fees and No Loads on Capital

For more information on RiskWerk, please follow the Tags or Categories attached to this Letter or simply enter Search for additional references to any term that we have used. Related data may be obtained from us for free in a machine readable format by request to RiskWerk@gmail.com.

Disclaimer

Investing in the bond and stock markets has become a highly regulated and litigious industry but despite that, there remains only one effective rule and that is caveat emptor or “buyer beware”. Nothing that we say should be construed by any person as advice or a recommendation to buy, sell, hold or avoid the common stock or bonds of any public company at any time for any purpose. That is the law and we fully support and respect that law and regulation in every jurisdiction without exception and without qualification to the best of our knowledge and ability. We can only tell you what we do and why we do it or have done it and we know nothing at all about the future or the future of stock prices of any company nor why they are what they are, now. The author retains all copyrights to his works in this blog and on this website. The Perpetual Bond®™ is a registered trademark and patented technology of The RiskWerk Company and RiskWerk Limited (“Company”) . The Canada Pension Bond®™ and The Medina Bond®™ are registered trademarks or trademarks of the Company as are the words and phrases “Alpha-smart”, “100% Capital Safety”, “100% Liquidity”, ”price of risk”, “risk price”, and the symbols “(B)”, “(N)” and N*.

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