Screener C – January 17, 2025

1 Seaboard Corporation (SEB) – remains on list

December 2024 is the first occurrence of Seaboard Corporation (formerly known as Seaboard Allied Milling Corp) on our screener. This Merriam, Kansas headquartered hog producer and pork processor has over $8.0bn in LTM sales and a market capitalization right around $2.4bn. In the United States, Seaboard is primarily engaged in pork production and processing, and ocean transportation. Overseas, it is primarily engaged in commodity merchandising, grain processing, sugar production, and electric power generation. Seaboard’s pork division is one of the largest vertically integrated pork processors in the U.S. With only ~1.1mm common share outstanding, the price per share had traded anywhere between $4,500 and $2,500 over the past 10 years. The company pays a consistent but small dividend and has bought back some stock (although very little) in the past 4 years. Over the past 10 years, sales have grown on average ~10% while earnings have grown nearly 20%.

COMMENT: The underlying commodity exposure inherent in Seaboard’s operation tends to introduce cyclicality to the company’s valuation, however a strong cash position, strong current ratio and low leverage make this a reasonably attractive opportunity. We will investigate further.

2 Harley-Davidson Inc. (HOG) – remains on list

First appearing on the list in October 2023 (Y231029) and intermittently thereafter, Harley-Davidson manufacturers motorcycles, motorcycle parts, accessories and apparel. Based in Milwaukee, WI, the company is one of the leading motorcycle manufacturers in the world and is well-recognized for it’s iconic brand. The parent company consists of a manufacturing company (HDMC), a financing business (HDFS) and a majority stake in LiveWire a U.S. electric motorcycle company. Sales have essentially been stable over the past 10 years, excluding 2020 when supply chain shocks and consumer demand hit particularly hard. The common stock pays a dividend and the company has been repurchasing some shares over the past two years. Management has been very focused on cost cutting and maintaining profitability, while higher interest rates have materially pressured recreation industry participants.

COMMENT: The financing business certainly needs more diligence. At initial glance however, a healthy cash position and debt / EBITDA levels below 1.5x for the manufacturing and sales side of the house, appear to be a comfortably low level.

3 QXO Inc. (QXO) – remains on list

QXO (formerly Silversun Technologies, Inc. – SSNT) is a value-added reseller (VAR) of business software, offering solutions for accounting, business management, financial reporting, managed services, and other services to small and medium businesses. This business has recently transformed through an inventive transaction led by Brad Jacobs, the founder of United Waste Systems (now Waste Management), United Rentals, and other companies. The transaction was completed in June 2024, with Jacobs becoming CEO and board chairman, effectively transforming Silversun (with a previous market cap below $20mm) into a reorganized QXO with a large cash infusion. The company’s strategy is now to become tech-forward leader in the building products distribution industry via accretive acquisitions and organic growth.

4 Moderna Inc. (MRNA) – new this week

Appearing for the first time on Screener C this week, Moderna is a biotechnology company that researches and develops drugs. Headquartered in Cambridge, MA the company’s drugs are based on Messenger RNA (mRNA) – a key component studied within the field of molecular biology and used to deliver vaccine solutions for the COVID-19 pandemic. The company’s revenue is purely from their COVID-19 vaccine although they have recently gained FDA approval for a vaccine intended to treat RSV (respiratory syncytial virus). The company went public in December 2018 and has only achieved profitability on a GAAP basis for FY 2021 and 2022. Revenues have collapsed sharply since their 2022 high. Some believe mRNA can be used to create new medicine classes and drugs with the potential to materially improve human lives and open entirely new markets.

COMMENT: Because biotechnology company valuations can vary widely, often spiking and plunging on news related to regulatory approval or perceived drug performance results, we remain very hesitant on the sector broadly.

5 Hewlett Packard Enterprise Company (HPE) – lost this week

HP Enterprise Co traded higher this week and is no longer on the list, as the share price to cash per share is now just slightly over 2.0x. Shares are now changing hands around $23 per share.

Appearing for the first time on this screen in December 2024, Hewlett Packard Enterprise Co provides computer hardware, software, and services for businesses and cloud / hybrid-cloud deployments. The San Jose, California company was originally spun out of Hewlett-Packard in 2015 and has recently gained attention for it’s AI-related infrastructure that is more tailored to enterprise clients than other computer hardware competitors. Revenues and earnings have been relatively flat for the past 7 years. HP pays a consistent dividend (~2.3%), has not repurchased stock, and has a comparatively low PE multiple (~12.0x LTM P/E) for the computer hardware / IT sector. The company is in the process of acquiring Juniper Networks – intended to compliment and scale the company’s existing networking business.

Interpreting results

Broadly this is an output of U.S. companies with a current market equity value above $2bn, a moderately low market price relative to GAAP book value, and moderately low share price relative to cash per share. When compared to our YTB screens, screener C will identify smaller companies often related to financial services or related industries because of our price to cash threshold.

The output generally produces potential targets that require a particularly high level of analysis. Operating models and capital structures of anything on screener C need particular scrutiny. Every so often, we find an interesting company that is facing temporary challenges and / or circumstantial headwinds. These instances warrant timely and careful investigation.

Why this screen can be helpful

We find watching this output over time, allows us to quickly identify potential companies or situations to investigate further, augments the weekly Value Line publication well, and keeps us informed on the less-loved corners of the public markets without having to watch misleading charts or spin our wheels on short-term market movements.  We like to observe new entrants and subsequent exits to the list, over time, and share with our trusted readers.