Meat Producer? 22 Billion company? 11x Price to Earnings?

Say no more, I´ll buy it.

In this thread I´ll explain the reasons behind the low valuation of Tyson Foods ( $TSN ), the largest poultry producer in the US, and why I recently invested in the company.

Let´s start with the easiest. Tyson Foods was the second largest US meat producer by 2017, and it´s currently the largest US poultry producer. This Fortune 500 company is so big that, when a covid outbreak took place in their installations, Meat shortages arose in grocery stores.

When we talk about a company of this magnitude, which business has been proven and sustainable since the year 1940, it is feasible to be intrigued and ask why it trades at such a low valuation (only 11 per and 11.2 p/s ratio!).

Quickly we are able to evaluate any chance of it being related to an industry valuation effect (peer group).

Other poultry suppliers have very different valuations. For example, Pilgrim’s Pride’s trades at 27.7 per while Sanderson Farms at an impressive 112.8 per ratio.

What´s going on at tyson Foods that makes the company then so worrying for investors? There are three major reasons for that.

The first, and one of the most important:

In 2016 a lawsuit appeared against Pilgrim's, Perdue Farms, Tyson Foods and Sanderson Farms, which claimed that these companies were conspiring to inflate chicken prices.

Later, in 2019, the U.S. Justice Department launched an investigation of such claims. Since then, many Restaurants relying on chicken prices have also filed lawsuits making antitrust accusations on the suppliers mentioned above.

Tyson Foods denied all the charges, and continues to do so.

(I’m not suggesting anything about the veracity of the claim, I just highlight it.)

This legal battle continued until the present year and has caused many struggles to the co.

This unknown is clearly not loved by investors. And it is well beyond reflected in the valuation as I see it.

The second big cause behind the low valuation of this company revolves around unethical management misbehavior.

A wrongful-death lawsuit was filed on November 18 against a Tyson Plant manager because of not taking enough preemptive measures and literally "organizing a bet" ...

available only for management to bet on how many employees on the plant would test positive for COVID.

That is a very strong claim that is able to upset anybody and nobody should side with the people involved.

Finally, the third problem surrounding Tyson foods is very correlated to the last point. Following those allegations, many class action lawsuits are being filed against Tyson Foods, claiming in response to those events that the company misled shareholders about COVID-19 protocols

Firms included involve The Rosen Law Firm, Shall Law Firm and many others.

After this, you may be asking why I invested in the company in such a bad time and context. Here´s why.

I have zero doubts that Tyson Foods is currently undervalued at these prices. The big problem are the lawsuits.

However, recently i got alerted on Jan 20 that Tyson Foods settled the claims with all the restaurants for only 250 Million. I say only because of how big that amount was affecting the share price and how small it is compared to the business revenue.

Moreover, In December, Tyson Foods announced it had fired the 7 managers involved in the betting pool. We don´t know about the result of the lawsuit related to the misbehavior yet, but after the settle of the first lawsuit, the valuation gets much more interesting.

Finally, the company will report earnings the 11th of February so that I have more intentions to buy in now. Also, I think all the money printing is inflationary (many think it is in fact deflationary), therefore I think the price of chicken and meat will rise as a consequence.

I decided to buy 15.72 shares of Tyson Foods the second of February at a price of 63.61$ per share.

I hope I was able to help you understand the Tyson Food´s situation.
Thanks for reading everybody.

By @broadcast_real

End of thread.

:)