Beyond Belief

By Mark Eshman, ClearRock Chairman & CIO July 29, 2019 Insights
Beyond Meat

Beyond Meat’s “Beyond Burger” and the self-proclaimed “Future of Protein.”

Don’t get me wrong.  I like Beyond Burgers.  I like Beyond Sausage.  In fact, my wife is a tad annoyed at packages of them stacking up in our freezer.  Aside from the fact that they contain almost as much fat as their all-cow-counterparts, Beyond Meat products are really good for the planet and their long-term regenerative contribution to the food supply chain.  But the stock?  It’s beyond belief.

Million with an “M”

The company reported sales last year of just under $90 million.  That’s million with an “m.”  They went public in May at $25/share which valued the company at $1.5 billion.  That’s billion with a “b.”  But that’s just the beginning.  Since the IPO, the company has unleashed a steady trickle of press releases announcing new customers such as Dunkin’ and Del Taco, new products such as fake chicken strips, and last week’s blockbuster: fake bacon.

The net result:  today’s pre-earnings announcement stock price is about $221/share, giving the company a valuation of close to $14 billion.  Just to put that in perspective, Conagra, the 100+ year-old Chicago-based food giant with $11 billion in revenue and brands such as Birds Eye, Orville Redenbacher’s Peter Pan, PAM, Hebrew National, Healthy Choice, and Egg Beaters is valued at $14 billion.  CNBC recently pointed out that in its first two months of trading as a public company, Beyond Meat is now valued higher than 25% of the companies in the S+P 500.

An Age-old Story

Teddy Ruxpin

Worlds of Wonder’s Teddy Ruxpin, the storytelling bear.

Why? The short answer is this: speculation.  Over the course of my 38-year Wall Street career, this movie has played before.  In 1985, Teddy Ruxpin, the best-selling talking bear sent shares of Worlds of Wonder soaring to a valuation that far-exceeded the company’s asset value.  When company insiders started unloading shares, investors got spooked.  By 1988 the company was in bankruptcy and eventually liquidated.  The examples of speculative tech companies in the late 1990s are too numerous to mention. But by 1999, if you bought shares of a tech company with a four-letter symbol that had anything to do with the internet, you probably made money in it…until you didn’t.

What is most troublesome about Beyond Meat is that, like most industries, when one company is successful, competition increases.  This is not a technology or biomedical company with some unique intellectual property. It is a fake meat company, peddling a credible solution to the sustainability of our protein food chain.  And while that’s admirable, it’s not something that dozens of other food companies couldn’t and won’t do.

If you want to preserve and grow your wealth, invest in a diversified portfolio of stocks and bonds.  If you want to feel good about saving the planet from the industrial agricultural complex, eat a Beyond Burger, but the stock? It could be hazardous to your health.

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Disclaimer:

Some material in this article is based on information from a variety of sources we consider reliable, but we do not represent that the information is accurate or complete. The material provided herein is for informational purposes only. Due to various factors, including changing market conditions, the content  may no longer be reflective of current opinions or positions. Moreover, you should not assume that any  discussion or information contained in this article serves as the receipt of, or as a substitute  for,  personalized  investment  advice  from  ClearRock  Capital,  LLC.  To  the  extent  that  a  reader  has  any  questions regarding the applicability of any specific issue discussed above to his/her individual situation,  he/she is encouraged to consult with the professional advisor of his/her choosing. A copy of our current  written  disclosure  statement  discussing  our  advisory  services  and  fees  is  available  for  review  upon  request.

ClearRock

Author Mark Eshman, ClearRock Chairman & CIO

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