The Drip Portfolio
IFF grew sales only 7% between 1994 and 1998, and its stock is currently flat with prices reached in... drum roll, please... 1992. The company has strong free cash flow, it is impressively profitable, and the sales and net income slowdown were not entirely its fault that past four years, so we were still willing to grant it the benefit of the doubt and a second chance.
Our main concern as we analyze prospects is that the company grows sales and earnings in the future, providing returns well beyond the not insubstantial 4% dividend that IFF pays. When you consider that the stock has gained only about 75% the past 10 years, while the S&P 500 has gained over 300%, we were generous to give the company a second chance. It is our due diligence, though, more than generosity. We simply don't want to miss any potential diamonds in the rough.
Well, after a few days of looking, I don't believe that we're missing anything. Or, if we are, we wouldn't even know it.
What am I talking about? To set the stage (an ironic stage, if you will), first consider this press blurb from June 4, 1999:
"IFF Seeks to Raise Its Profile: International Flavors & Fragrances will sponsor an exhibition and auction of Marilyn Monroe memorabilia as part of a strategy to increase its exposure in the fragrance supply industry."
The stage is set: IFF wants to increase its public profile, at least within the fragrance industry.
Now, consider that I spent two hours searching for IFF's quarterly earnings report online, but I have not been able to find it anywhere. The company doesn't have a website or an online presence, and it apparently didn't issue a quarterly press release that gets picked up by any major newswire. This isn't an outright sin, but it certainly doesn't make sense, especially for a company with a commission-free direct investment plan.
Get out your hammer. Fetch a box of nails. Now step up to the wooden coffin with the IFF wreath draped over it. Now begin to hammer in a nail. Pound, pound, pound! Keep pounding. There is one nail pounded in to the top. Now pound another one. Watch your thumb. Now pound another nail. And another. Shut that coffin tight. (Gruesome, isn't it? As Halloween approaches, maybe Brian will have nightmares.)
If IFF is as inaccessible as it appears, then we are not interested in pursuing it as potential investors. By every search I made, the company appears quite inaccessible online. Other than the law-required SEC filings, there does not seem to be any press release from prior quarters, either. If I accessed the Fool's Bloomberg terminal, I would probably find something, but most of you at home don't have $2,000-per-month Bloomberg terminals sitting on your desk. (If you do, what the heck for?)
Just as we won't invest in an overseas company like Nestle that reports hard-to-figure results in Swiss francs, we're not interested in investing in an American public company that doesn't have enough of a public face to issue press releases widely for its investors or potential investors.
All that I could find of Q3 results, after much searching, was a Reuters table that I edited.
International Flavors Q3 net falls
In millions ($000), except EPS
EPS $0.46 $0.47
Net income $49,155 $50,249
Net sales $364,674 $349,846
Nine Months Just Ended:
Thru 9/99 Thru 9/98
EPS $1.18 $1.57
Net income $125,369 $168,782
Net sales 1,103,518 1,088,510
Note: EPS before a one-time charge was $0.48 vs. $0.47 in Q3, and $1.42 vs. $1.57 for the year-to-date period.
As you can see, for the past nine months sales rose modestly while net income declined modestly following one-time charges. Exactly why net income dipped while sales gained is difficult to say, especially regarding the third quarter, seeing how we have, uh, just the information above available to analyze.
This company doesn't match our investment criteria (no double-digit growth here for a long time) and doesn't even appear investor-friendly. Unless I'm a dolt and more information is available online, we're moving on. Even if I am a dolt, we're almost certainly moving forward. If I am a dolt and you know of complete IFF Q3 information that is online, please post to alert us on the Drip Companies message board. Tell us that I'm a dolt, and then point to the recent, detailed IFF information.
The next company on our study list that we're going to unearth from a rather quiet existence is Brown-Forman (NYSE: BF.A). So far, only Coca-Cola (NYSE: KO), PepsiCo (NYSE: PEP), and Wrigley (NYSE: WWY) have advanced to our finalist list, and we have only two companies remaining in the first round of our food and beverage study, Brown Forman and high-yield nose-diver Philip Morris (NYSE: MO).
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