Tuesday, November 17, 2009

I'm Rooting For The Oprah Effect

This past week has been an excellent news period for Smart Balance. The price of a share of its stock reflects the improved news flow. What's new? Here are the announcements:

1. A new credit agreement with relaxed covenants. The company stated they still expect to comply with the old covenant thresholds, but they don't have to. they now have added flexibility to grow. Moody's upgrades to stable.
2. The national roll out of their new milk product. After test marketing in Florida and the Northeast this year, SMBL will go nationwide in 2010. The milk business is considerably larger than the spreads market and provides the opportunity to grow sales, market share in the dairy isle, and profits.
3.Today the company announced an agreement with Bob Greene, Oprah's health and fitness guru, to develop and market Bestlife products. These healthy foods and drinks will carry the endorsement of Greene and, implicitly Oprah. Smart Balance will remain the premium products, with Bestlife a more affordable product line.
4. Steve Hughes, SMBL CEO purchased several thousand shares in the open market. A few days earlier a director did likewise.

All this news is nice and may move the stock upward, which makes me feel good, but Smart Balance is a five year play. If you have patience, I think we'll earn multiples of our investment when Hughes sells his then billion dollar company to a major food company for a considerable sum. I'm willing to wait.

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