In today's uncertain times, it's best for investors to think like the "Oracle of Omaha" Warren Buffett. When I say this, I'm meaning that investors need to play defense. Defense in this case is buying a company that will do well no matter what the rest of the stock market or general economy is doing. It's about buying a good quality company with a great balance sheet, strong revenue and earnings growth, and a history of returning money to shareholders in the form of dividends or share buybacks. One such company that I have identified is Armanino Foods of Distinction (OTCMKTS:AMNF).The good news for small investors is that they won't have to compete with Warren Buffett to buy AMNF. Its current market cap of $64 million is much too small for multi-billionaire Buffett and his conglomerate Berkshire Hathaway. Shares are currently trading at just 16x earnings, 1.9x sales, and have a 3.79% dividend yield.Armanino Foods of Distinction, Inc. produces and markets frozen and refrigerated food products in the United States. The companys frozen products comprise pesto and other sauces, Italian pastas, and cooked meat and poultry products, as well as cooked beef and turkey meatballs, and cheese shakers. Its cooked and uncooked frozen stuffed pastas, includes meat, butternut squash, cheese ravioli and jumbo cheese, and jumbo mushroom ravioli; jumbo cheese/spinach green dough ravioli; meat filled, tricolor cheese, and cheese tortellini; and tri-color cheese and cheese capelletti, manicotti, and stuffed shells. Armanino Foods of Distinction, Inc. offers its products under the Armanino brand name. The company markets its products through a network of food brokers to retail and food service distributors, club-type stores, and industrial accounts. Armanino Foods of Distinction, Inc. was founded in 1978 and is headquartered in Hayward, California.The company is firing on all cylinders. Armanino reported the highest year to date sales and earnings in its history, despite a drop in similar results for the third quarter. Net sales for the third quarter of 2015 were $8,488,032 compared to $8,697,316 for Q3 2014, a decrease of <2.4%>. Income from continuing operations before taxes for Q3 2015 were $1,586,641 compared to $1,872,209 for the same quarter in 2014, a decrease of <15.3%>. Earnings per share in Q3 2015 were $0.030 compared to $0.036 in 2014, a decrease of <16.7%>.
Net sales for the first nine months of 2015 were $25,641,861 compared to $23,668,523 for the same period in 2014, an increase of 8.3%. Income from continuing operations in this period for 2015 were $5,021,088 compared to the 2014 figure of $4,861,708, an increase of 3.3%. Earnings per share for the nine months of 2015 amounted to $0.096 compared to the $0.093 posted in 2014, an increase of 3.2%.
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What I like about the company is that management is focused on running its business and not putting out press releases. The company updates its shareholders via its quarterly earnings reports. The company delivers and then reports, which is what Buffett and Berkshire Hathaway do as well. CEO Edmond Pera said at the end of the third quarter:
“The strength of our US markets drove our year to date growth in sales and earnings, and offset weaker results in our Asian markets during this period. The solid momentum of our US markets continued into the third quarter. However, significantly weaker Q3 sales in our Asian markets, as well as heavier than normal spending on promotional investments resulted in a year over year decrease in our financial performance during this period. The stronger US dollar and soft economy in our principal Asian market resulted in weaker demand for our products in that market. Third quarter sales in our Asian markets represented 7% of total company sales, compared with 13% in the same period last year. To date in the fourth quarter, sales in our Asian markets are above prior year. Even though the rate of our promotional expenditures was much higher than usual in Q3, we anticipate that these investments will increase our US market share and profitability in the short and long term. For perspective, even though we saw a drop in our Q3 operating income, this quarter was being compared to last year’s third quarter which to date was the most profitable quarter in the Company’s history.”
“We are optimistic about the strength of our financial performance in our US markets – our US sales pipeline is strong and we are working on several exciting prospects. Although fourth quarter sales to date in our Asian markets are above prior year, we cannot say with any certainty what our longer term outlook in those markets are. Total sales towards the end of the third quarter, and total sales and bookings to date for the fourth quarter have trended higher than the same periods last year. Our cash position remains healthy and is significantly higher than it was this same period last year. We continue to pay down our long term debt which is scheduled to be fully paid off on time before the end of second quarter in 2017.”
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Consider that In 2008, EPS was .02. In 2014, it was .12. In the last three full years, net income has increased from $2,888,663 (2012) to $3,847,176 (2014). The company's cash position has grown from $1,329,955 in 2012, to $3,600,134 at the end of Q2 15 despite paying down debt.
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Disclosure: We have no position in AMNF either long or short. We have not been compensated for this article.
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