Proud to Own Series
This week, we are starting a brand-new “Proud to Own” Series.
Each Wednesday, we will bring you a new core portfolio holding and why it is a part of our “Proud to Own” universe.
As a reminder, for the company to be included in our “proud to own” universe, it must meet three criteria:
1. It must not violate your faith and values. Some of the types of companies we can avoid include those involved in the abortion industry, those producing explicit entertainment and pornography, those conducting embryonic stem cell and fetal tissue research, companies funding and lobbying for homosexuality, those involved in vices like alcohol, tobacco and gambling and companies that are abusing the environment.
2. It should be a company that complements your faith and values. This involves finding companies: Helping the poor and defenseless; Protecting the sanctity of human life; Producing morally sound entertainment; Finding cures for life threatening diseases; and Improving the society we live in…
3. It should be a company with strong profit potential. This involves finding companies in solid financial condition that have strong profit potential and/or provide strong cash flows via dividends. We use a five-point inspection to evaluate each investment we are considering. We analyze a company’s earnings potential, price momentum, risk, financial health, and its current valuation. Our goal is to find quality companies that stay true to your values AND are profitable! This is not an either /or scenario but rather a winning combination.
This Week’s Highlighted Company
This week we focus on an innovative food company.
Think about all of the time you spend either preparing, cooking, or eating meals. This probably consumes a significant portion of each day. Whether you eat at home or on the run one company is disrupting the way we approach food.
For most people, this company is not a household name. In fact, very few people know the company. You probably will recognize some of its products and certainly its customers, but for the most part, this company is relatively unknown. Yet some of the greatest cooking innovations are taking place in this company’s product lineup.
The company leading the charge is Middleby Corporation (NASDAQ: MIDD). Of all the things a company can supply none is more important than trust.
This is evidenced at The Middleby Corporation with its strong relationships with its customers, suppliers, shareholders and employees.
Trust is why it is the world leader in commercial cooking equipment. It is about innovation and improving the way we cook foods. It disrupts the food industry with advanced cooking innovations that bring speed, energy savings and green benefits to commercial kitchens all over the world.
It may not be a household name, but its products are in one of every three restaurants around the world from Dunkin Donuts to Starbucks. Its food processing equipment is widely used by Costco Wholesale (NASDAQ: COST). And its customers have been with Middleby for decades. It’s because Middleby focuses on trust and quality.
Take a look at its impressive brand lineup:
5 Reasons this Company has been Successful:
1. Great Leadership. Middleby’s CEO, Selim A. Bassoul, has transformed from a Lebanese, dyslexic boy who struggled in school into one of the greatest leaders of a publicly traded company. With an ambitious vision of golden-brown toast in 30 seconds flat, steamed broccoli without water, and roasting a frozen turkey in a jaw-dropping 20 minutes, Selim has changed the world of food! He is one of the longest serving CEOs of a US publicly traded company. His leadership has turned a struggling, unfocussed firm worth just $15 million in 2000 into a global powerhouse now worth over $6 Billion! Selim is a game changing CEO who is a titan in the food industry.
2. Hiring the right people! Middleby invests in its employees. It is unheard of to have over 3,000 employees and a 98% retention rate, but that is exactly what Middleby has. It is very selective when it comes to hiring, but once they find the right fit, its employees stick around.
3. It motivates its work force. It believes in “3 degrees of separation” where no employee has no more than two managers levels above them. It also believes strongly in pay for performance. Its employees are better at what they do and able to trump the competition because of knowledge, experience, and longevity.
4. It is disruptive! It doesn’t wait around for its customers to tell it what it wants. Yes, they listen to customer feedback, but it spends most of its time and energy looking for game changing features to save its customers time, improve the way they prepare and heat food, and reduce its customers’ expenses.
5. Focus on generating cash flow. Middleby focuses on making sure it is always bring in more cash. This basic principle helps it to remain lean and mean. It can survive the ups and downs of the economic cycles and deliver impressive gains to its shareholders in good and bad times.
Now this company doesn’t offer flashy new products like the lastest and greatest new gadget from a high technology firm or a world changing scientific breakthrough that comes from an up and coming biotechnology firm. Its products may seem boring from an outsider’s perspective, but not to its thousands of customers who rely on Middleby each and every day for how they prepare and cook food.
How has it performed?
Take a look at how it has done since 2009:
The company has had its ups and downs, but it has achieved a 35.8% annualized return over the past 15 years.
Bottom Line: Middleby has the innovation, leadership, and the financial performance we look for in a “proud to own” company. That is why it is a part of our Contrarian Strategies Portfolio, which looks at innovative game changing companies.
Disclosure:
INFORMATION PRESENTED IS FOR EDUCATIONAL PURPOSES ONLY AND DOES NOT INTEND TO MAKE AN OFFER OR SOLICITATION FOR THE SALE OR PURCHASE OF ANY SPECIFIC SECURITIES, INVESTMENTS, OR INVESTMENT STRATEGIES. INVESTMENTS INVOLVE RISK AND UNLESS OTHERWISE STATED, ARE NOT GUARANTEED. BE SURE TO FIRST CONSULT WITH A QUALIFIED FINANCIAL ADVISER AND/OR TAX PROFESSIONAL BEFORE IMPLEMENTING ANY STRATEGY DISCUSSED HEREIN.
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