Seaboard Corp. (AMEX: SEB) - $1,290

First, before you pass out, remember the price of the stock has nothing to do with how cheap or expensive it is. Besides, I think this is a $1,500 by the end of 2006 and a $2,000+ by the end of 2008.

This stock has had quite a run up over the years. 10 years ago, it was $246/share. It has been to around $1,800+ three times since July, 2005. It recently then fell down to $1,130, before rallying back to $1,469 and then back to $1,190 just a week ago. It is now trading at $1,290 and today traded as high as $1,334.95. It is key to note how the $1,190 bottom out is higher than $1,130, at least from a short term standpoint. Back in May, 2006, when the stock was trading around $1,600 or so, I read an article that cited this stock as cheap, even at those levels. I think what we are seeing here is some inventory turnover in the stock, and once complete, I foresee it breaking the $1,800 resistance line and moving up from there.

The company is primarily engaged in food processing and transportation and is a fairly large company with over 10,000 employees. http://www.seaboardcorp.com/, their web site, has more information.

The company was recently featured in Forbes as a company that showed significant activity of the major owners & company buying back stock on the open market. There are only 1.26M shares total outstanding and only 349,000 or so publicly available. The bulk of the shares are controlled by the founding family. The small number of shares out there create some volatility and really limit the supply of stock available. This is key, because as buying comes in, it eats away at what is available. Institutions purchased about 100,000 shares over the past quarter.
The company's price to earnings ratio is 6.3, they have $320/share of cash in the bank, and boast a 26.7% return on equity. The latter is a very strong number for a company with a 6.3 P/E. Consider Coca Cola (NYSE: KO) with a 30% ROE and a P/E of 21. True, not exactly apples to apples, but this might work better for a competitive comparison.

Smithfield Foods (NYSE: SFD) has a forward P/E of about 11.85 and a current P/E of 20.3. SEB, remember, has a 6.3 current P/E, boasts a 16.7% gross margin (vs. 10.8% for SFD) and operating margin of 11% vs 4% for SFD. Comparisons to Tyson Foods, Hormel, ConAgra, Danone, and others show that the ratios for SEB are strongly undervalued.

Part of the reason why is that SEB keeps a pretty closed lid when it comes to investor relations. No monster press releases or campaigns, which is a good thing for now as it provides an opportunity to accumulate. Eventually, though, the word will get out and we should see this stock receive a valuation a little more in line with its peers, although maybe slightly cheaper.

The company also settled an EPA allegation and the same publication also had an article about the strength of the pork market, which will benefit SEB tremendously (see www.porkmag.com/porkalert/latestalert.htm).

Some calculations I have run show this company has an intrinsic value of $4,200, but that may be a bit aggressive, at least for the next couple of years. However, it could possibly get there in the next 5-7.

There is a small dividend, but not a large yield (0.20%), but I expect this to grow as well as their earnings grow, but we'll see...because of the ownership structure, this may not be the case.
The company also trades at less than 1.5x book value, and I believe this is cheap considering their debt structure. They carry some, but are not heavily leveraged. Their strong cash flow will also help the company pocket $20-$30 per share of cash each year in most years to come.
All and all, for the long term, this is probably a safe place to put your money that over a course of several years, should grow nicely and has a very strong chance of outperforming its peers and perhaps the overall market in general.