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Seaboard Corporation

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SEB | This Conglomerate Does It All | LONGSeaboard Corp. engages in hog production and pork processing in the U.S., commodity trading and grain processing in Africa and South America, cargo shipping services in the U.S., Caribbean and Central and South America, sugar and alcohol production in Argentina, and electric power generation in the Dominican Republic. It operates through the following segments: Pork, CT&M (Commodity Trading and Milling), Marine, Liquid Fuels, Power, Turkey, and All Other and Corporate. The Pork segment produces and sells fresh and frozen pork products to processors, foodservice operators, distributors, and grocery stores. The CT&M segment is an agricultural commodity trading, processing, and logistics company. The Marine segment provides cargo shipping services. The Liquid Fuels segment produces biodiesel at facilities in Oklahoma and Missouri and renewable diesel at a facility in Kansas. The Power segment generates electricity for the Dominican Republic power grid. The Turkey segment produces and processes turkey products. The All Other and Corporate segment processes jalapeno peppers. The company was founded by Otto Bresky in 1918 and is headquartered in Merriam, KS.
AMEX:SEBLong
by DivergenceSeeker
Seaboard Q2 2020 UpdateDespite a horrible quarter, where management failed to take advantage of incredibly low share prices, I find myself coming back to $SEB for the same reasons I invested in the first place. You could say management was conservative by not spending big on repurchases and instead using the money to repay debt, fine, maybe so, but it was dumb and they still have a chance to figure it out now, despite having little incentive. About two months ago I predicted roughly $120M of income from investment activities for this quarter and it came in at around $113M which means the portfolio is being well managed on the equity side. As an investor in $SEB, the cash and securities on the balance sheet represent a large portion of the equity. Prudent management of $SEB's investment portfolio reminds me of a Berkshire Hathaway type opportunity where the operating cash flow is sufficient to supply new money into the investment operation. The problem is the free cash flow isn't there and hasn't been lately. They need to consolidate operations and start looking at higher margin opportunities, simpler is better. Diversification and risk aversion as strenuous or capital intensive then just sticking with the highest margin segments. The company is spending a lot of money on PPE with $108M invested during the second quarter with $75M going to Guymon, $19M going to the barge situation in the Dominican amongst other things. They've got another $128M budgeted for 2020 at Guymon and $174M in total. I do think the stock is inexpensive, but the high CAPEX and operating losses in Marine, Sugar, Alcohol, Power and Turkey is brutal. It's like, why are we running businesses with such high volatility and low margins? Pork and Commodities were OK with commodities being stronger in my opinion. Commodities actually wasn't bad if not for the way it is reported under GAAP with derivatives being marked-to-market, skewing operating income downward based on current prices. Thing is, futures and forwards generally are longer term in this type of business, suppliers are trading on daily basis on some of the hedging they do - it's just not reported that way. Right now, today, I do not own any $SEB shares. I'm considering re-opening a position but I don't have enough conviction about the actual free cash that this company can produce. I think fair value is in the mid $4000's but it there are so many premiums and discounting mechanisms attached to this stock that it doesn't get the same valuation as companies that carry less risk (think liquidity, voting power, highly capital intensive, etc.) I need to think about more - it's very difficult for me to justify this versus the rest of my equity portfolio which is concentrated on just a few names with similar characteristics in terms of governance. Recommendation: HOLD
AMEX:SEB
by drsabir