WH Group

Ticker: WHGLY, Buy below $15.

WH Group is the largest pork company in the world — with holdings in China, U.S. and Europe.

Why I Would Buy

1.       Cheap – WH’s stock is currently selling for < 10x forward earnings.

2.      Market Dominance – WH group has near global monopoly in pork production, processing and packaging; the rest of the market is highly fragmented and does not possess a comparable scale of operation.  

3.      Opportunistic Buy – The stock is buffeted by multiple factors: the trade war, and pork disease in China. Both these have already been priced in, a snap back is likely in the medium-to-long term.

4.       Low Payout Ratio – The dividend is a respectable 4%, with a payout ratio below 30%.

5.      Good Credit Ratings – Long term debt of the company is rated investment grade by all three rating agencies.

What Could Go Wrong

1.      Chinese Company – Potential for poor accounting and governance standards, government intervention, and questionable shareholder rights etc.

2.      Trade War – The company imports significant volume of Pork from the US and is directly in the crosshairs of the tariffs.

Disclosure: I am long WHGLY, please read additional disclosures here before taking any action based on this post.