Is Smithfield Foods a Worthwhile Investment?

With shares of Smithfield Foods (NYSE:SFD) trading around $34, is SFD an OUTPERFORM, WAIT AND SEE, or STAY AWAY? Let’s analyze the stock with the relevant sections of our CHEAT SHEET investing framework.

T = Trends for a Stock’s Movement

Smithfield Foods produces and markets a variety of fresh meat and packaged meat products both domestically and internationally. It operates in four segments: Pork, Hog Production, International, and Corporate, each of which consists of a number of subsidiaries, joint ventures, and other investments. Fresh and packaged meats are essential food choices for many consumers around the world. As populations grow and consumers look to add these options to their food choices, companies like Smithfield Foods stand to see significant profits. So long as demand for meat products exists and populations expand, Smithfield Foods will continue to be a strong company.

Smithfield Foods’s acquisition by Chinese meat producer Shuanghui International is expected to close by September 26, as it is believed 50 percent of Smithfield investors will approve the deal. Smithfield’s shareholder meeting to vote on the deal is scheduled for Tuesday, Reuters reports. The $4.7 billion deal would be the largest Chinese takeover of a U.S. company. It has faced significant backlash from consumers and lawmakers over food safety concerns.

T = Technicals on the Stock Chart Are Strong

Smithfield Foods stock has moved significantly higher in the years extending back to the financial crisis. The stock is currently fairly stagnant, as a takeover of the company may be imminent. Analyzing the price trend and its strength can be done using key simple moving averages. What are the key moving averages? The 50-day (pink), 100-day (blue), and 200-day (yellow) simple moving averages. As seen in the daily price chart below, Smithfield Foods is trading above its rising key averages, which signals neutral to bullish price action in the near term.


Source: Thinkorswim