Sysco: A "Sleep Well" Selection
09/26/2003 12:00 am EST
Gregory Spear, in his The Spear Report, has been concerned that the overall market might be getting ahead of itself. In line with his caution, his latest recommendation is a buy and hold selection in the defensive food sector for those seeking to "sleep well at night." Here's his review.
"There has been a lifestyle change in America, and as the boomers age we are more inclined to go out to eat," notes Gregory Spear, editor of The Spear Report. "When we do, if we eat at a national restaurant chain, chances are that about 35% of what we consume at that restaurant was purchased from a wholesale distributor named Sysco (SYY NYSE). Sysco is the largest marketer and distributor of food-service products in North America. It has sales of over $26 billion annually, which represents a 13% share of the entire food-service industry. While it has over 400,000 accounts, the majority of sales (63%) are generated from chain-restaurant customers. The company has posted 26 consecutive years of earnings growth, and current S&P estimates for fiscal 2004 come in at $1.36, up 15% from fiscal 2003. By the way, the S&P rates the company 5 stars - its highest rating. Sales are expected to rise 8-10% in fiscal 2004 with no margin or pricing pressure. Technically, SYY has a monthly chart that looks like a '90s tech stock that never hit the wall. It is one of the most impressive uptrends you will ever see. This is not a momentum stock, of course, it is a buy-and-hold candidate for the 'sleep-well-at-night' part of your portfolio."