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Payne's Picks

A ‘Big and Strong’ Stock Play

By Payne's PicksFOXBusiness

Sanderson Farms a good value for investors’ portfolio?

FBN’s Charles Payne, Heritage Capital President Paul Schatz, Stifel Nicolaus Portfolio Manager Chad Morganlander and Penn Financial Group founder Matt McCall on the outlook for Sanderson Farms.

Let’s talk about Sanderson Farms (NASDAQ:SAFM).

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It’s the number three player in the chicken space after Tyson (NYSE:TSN) and Pilgrim's Pride (NASDAQ:PPC).

It looks well positioned for huge growth and stronger margins, as corn prices decline and new opportunities including boneless improve. Overall chicken should be a huge winner in the health-conscious, protein-driven society. Everybody wants to be big and strong these days.

Its retail partners are the biggest names including Kroger (NYSE:KR), Safeway (NYSE:SWY), Publix and Wal-Mart (NYSE:WMT). Earlier this year, the Russian sanctions began to hurt them a little, but not nearly as much as it would have in the past. For the entire industry, exports to Russia have fallen to 7% of total, from 40% two decades ago. That had a big impact.

Last time I featured the stock it gaped open at 5 points lower. So hopefully you got filled a little cheaper than where it is now around. Bottom line, I think it’s an inexpensive stock. And I think Wall Street is probably catching up to this. Recently, fiscal year 15 earnings went up to $10.83, on consensus from $8.64 a couple months ago.

The chart is not that great, but there shouldn't be much resistance to $93, then from there $108. It’s not a short term play, although it’s been great the past couple sessions, but I do love it long term. I’d say slightly greater than average volatility, maybe greater than average risk, although long term I don’t see how they can miss.DISCLOSURES

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