Utz Brands - Not just a big bag of chips
A consumer staple with potential tailwinds - High Risk
I wanted to write more about stocks this year. To me, this is the right time to actually look at the macro picture and the fundamentals, when it comes to companies. I wanted to present ideas that are worth considering with my thesis on the bias - long or short - and leave it up to you to decide whether you want to buy or short, or even just stay away.
As you know my background is in corporate banking and one thing we always did was look at the economy and the industry. Courtesy of that, I follow a Top-Down approach of investing - looking at the Macro Big Picture, then the Industry and finally companies.
Nothing does well in a slowdown and a recession but the macro picture as we stand still has sectors of relative performance and these tend to be the defensive sectors.
Here’s a study of sector ETFs done by SPDR. As you can see, a recession basically means every sector has negative returns. But we can look at Consumer Staples, Healthcare and Industrials.
Looking at these sectors mean we have a greater chance of success when it comes to buying stocks.
This is not a deep dive into a company but, rather an investment memo into what makes the name attractive, basics of what the company does and the key risks. All investing comes with risks and this is not investing advice. More an idea of what to look at in the company.
The first consumer staple I have on my mind is Utz Brands and since this is one of the first stock reports, the investment thesis and key risks remain free to read below. ⤵️
Utz Brands UTZ 0.00%↑ - Long Bias
Risk category: High 🔴
📚 Investment Thesis
Snacks as a category remains resilient – it’s comfort food – low price point. Covered under SNAP payment.
They were pandemic winners, but people won’t stop snacking if they go back to work and most work is still hybrid.
Consumer Staples does well in a recessionary environment
Increased prices to offset inflation
Margin compression will now reverse due to lower input costs and freight costs
Debt has been restructured
New factory, new lines of business
Expansion across the country
⚠️ Key Risks
Acquisition spending has put pressure on cash flows and the balance sheet
Debt levels still remains high at 6x Debt-to-EBITDA
Subscribe and read on for the full analysis. And, as always, happy to hear your thoughts.