Every once in a while, a company comes up on my radar that looks and smells delicious. Tasty Bite was one such. They make ready-to-eat Indian food for the US market, are the largest player in their niche and are the preferred private label supplier to many large supermarket chains. Sounds yummy, right?
WRONG! If ever a picture was worth a thousand words, heres one...they are down 60% in the past two years!
Whats the catch? Well, they seem to have a marketing entity which is held by the company promoters. The publicly listed company makes the product and sells it at a slender margin to the privately-owned marketing entity which presumably pockets a bulk of the profit. This is just a sample from the bag of Great Indian Promoter tricks that convert shareholder profits to private wealth, but more on that in future posts.
Luckily, I was able to figure this out before I'd swallowed too much - I burnt my fingers but not the kitchen :)
3 comments:
I like your investment philosophy. It is very similar to mine.
Just like you have, I also got my fingers burnt. But, unlike you, I am still keeping them dipped in the Tasty Bite stew. There are analysts who closely follow the stock and swear by it. I am sure they would take note of your post.
Meanwhile, I suggest you take a look at DFM Foods. The P/E is rather high and the price has run up high. The management is truly value driven and their hard work has created share holder value. Therefore, I hope you would take a close look at it.
@kima69 - I have been tracking DFM for a while. It is a high quality company, and unfortunately the price has run up. Also their recent debt raise will put some pressure on PAT for a while. That being said, its fundamentals are really good, and is a stock I would like to own, but at the right price.
This is the reply I got from the Co Sec of Tasty Bite.
Tasty Bite Eatables Limited is the manufacturer of products that it exports. These products are marketed in international markets by Preferred Brands International Inc. (PBI). All A&M spend and brand building is done by PBI who has brand rights in these markets. TBEL as a manufacturer does not incur any marketing and distribution expenses for the products that are sold to PBI on an arm's lenght basis. Aside from this, the Company also has a food service business in India.
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