Gamble of the day: A punt on top food brands

Shares are often cheap for good reasons, says Phil Oakley. But that may no longer be the case at this top food brands maker.

If you've been trawling the stockmarket for cheap shares in recent years, the chances are you will have stumbled across this food makerby now. The maker of top food brands, such asMr Kipling cakes, Bisto gravy and Loyd Grossman sauces, has traded on a very low price-to-earnings (p/e) multiple for a long time. This has led many writers, including me, to suggest the shares are worth a punt. Yet so far they've proved a bad investment and volatile at that. So far, ithas proved the point that shares are often cheap for a reason.

The firm has two main issues. Firstly, it has been loaded up with too much debt. Secondly, its business has lacked focus and has had the misfortune of dealing with some tough supermarket customers. Successive management teams have tried to woo investors with the promise of repaying debt and getting the business back on an even keel, but they have yet to deliver.

Subscribe to MoneyWeek

Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE

Get 6 issues free
https://cdn.mos.cms.futurecdn.net/flexiimages/mw70aro6gl1676370748.jpg

Sign up to Money Morning

Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter

Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter

Sign up

Phil spent 13 years as an investment analyst for both stockbroking and fund management companies.

 

After graduating with a MSc in International Banking, Economics & Finance from Liverpool Business School in 1996, Phil went to work for BWD Rensburg, a Liverpool based investment manager. In 2001, he joined ABN AMRO as a transport analyst. After a brief spell as a food retail analyst, he spent five years with ABN's very successful UK Smaller Companies team where he covered engineering, transport and support services stocks.

 

In 2007, Phil joined Halbis Capital Management as a European equities analyst. He began writing for MoneyWeek in 2010.