Catering to Israel, Not Investors

By W.D. Crotty | More Articles
September 7, 2004 | Comments (0)

Food company G. Willi-Food (Nasdaq: WILCF ) reported that sales were up 34% and net income was up 87% in the latest quarter. The balance sheet has $8.4 million in cash -- that's $1.94 in cash for every share -- and the stock trades for $4.76.

Is there a debt problem lurking in this story? No; there is virtually no debt.

There is one problem for investors to consider, however. G. Willi-Food is one of the largest importers into Israel -- and Israel accounts for a majority of its business.

G. Willi-Food distributes more than 400 products, from canned fish and vegetables to dried fruits and nuts. A majority of its products are approved as kosher.

The company's healthy 13.5% operating margins are almost triple those at Chiquita Brands (NYSE: CQB ) and are far higher than the 9.7% achieved by ConAgra (NYSE: CAG ) . Although canned food specialist Del Monte Foods (NYSE: DLM ) and other diversified value-added food companies have higher margins, they do not offer rapid growth.

Tiny G. Willi-Food -- with only 4.3 million shares outstanding -- isn't so small that its operating results have gone unnoticed. The stock is up 130% over the last 52 weeks.

So, does G. Willi-Food measure up to Motley Fool Hidden Gems standards? Strong points are its insider ownership of 81%, its balance sheet, and its low price-to-earnings ratio. Of concern are low liquidity (only 2,000 shares a day are traded) and large competitors Strausse-Elite and Israel's largest food company, Tnuva Central Cooperative.

Cash-rich and value-priced, G. Willi-Foods is interesting. But Hidden Gems newsletter recommendations, with greater liquidity and clearer growth potential, have an average total return of 27% (versus 14% for the Standard & Poor's 500). G. Willi-Food is a jewel from Israel, but it does not measure up to Hidden Gems standards.

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Fool contributor W.D. Crotty does not own stock in any of the companies mentioned.

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