I remember this from c.2016 - it was a darling of the EM managers I followed/invested with.
As I'm sure you know, back then all EM Consumer Goods tended to trade at a premium, and there were/are dedicated EM Consumer Goods funds. The managers were very quality-focused, and would only invest in the best-managed ones. But most EM stuff has ground down gradually valuations-wise, I guess, not helped by COVID, as you say.
And people seemed to lose interest in LatAm smaller cos - two of the best funds I knew closed due to lack of interest/performance.
Nice! Yeah, it seems like the last decade has been one constant flow of capital away from EMs. It's obvious in the multiples. Herdez was at 10x EBITDA and 18x earnings in 2016. And the company did well from there. Earnings progressed nicely. But the multiple got cut almost in half and the stock struggled.
Herdez is a very interesting business. I thought about writing this one up a few weeks ago but to be honest I know very little about investing in Mexico. It's interesting to be able to buy a business with a well established portfolio of consumer packaged food products at this multiple and one that is heavily controlled by insiders.
I only knew of this one because Herdez salsas are almost as good as making them yourself. I had a Peter Lynch moment with this one.
I am pretty sure its their Guacamole https://www.salsas.com/herdez/products/salsas/guacamole-salsa-mild/ that's available in big jars (more like a runny sauce with a hint of lime flavor) in the Mexican store where I grew up - I could not stop eating it when I was there for the holidays 🤪
Interesting idea! I lived for 5 years in Mexico and enjoyed these salsas. To my surprise - upon returning to England recently - there are some Herdez salsas stocked in major supermarkets here (a new development I believe). Mexican cuisine in general is still in a growth phase throughout the UK (and Europe I believe).
One thing that can't be overstated is the currency risk here. Mexican revenues still account for >90% of total revenues.
I'm digging a bit and I find VERY weird the Impulses segment, Why do they even try to be a retailer? seems like diworsification to me. Fun fact, they used to own two tuna boats, but they divested it back in 2020 and now the tuna is processed by a third party. Point being, they could find new ways to destroy capital, lowering the ROIC.
Very cheap and profitable anyway, so odds are high that this will work nice.
I'll be traveling to Mexico D.F. in a few months, so I'll do a channel check haha :)
Holy Guacamole!
I remember this from c.2016 - it was a darling of the EM managers I followed/invested with.
As I'm sure you know, back then all EM Consumer Goods tended to trade at a premium, and there were/are dedicated EM Consumer Goods funds. The managers were very quality-focused, and would only invest in the best-managed ones. But most EM stuff has ground down gradually valuations-wise, I guess, not helped by COVID, as you say.
And people seemed to lose interest in LatAm smaller cos - two of the best funds I knew closed due to lack of interest/performance.
Nice! Yeah, it seems like the last decade has been one constant flow of capital away from EMs. It's obvious in the multiples. Herdez was at 10x EBITDA and 18x earnings in 2016. And the company did well from there. Earnings progressed nicely. But the multiple got cut almost in half and the stock struggled.
Speaking of Guacamole - their Guacamole https://www.salsas.com/herdez/products/salsas/guacamole-salsa-mild/ available in the Mexican store where I grew up is ABSOLUTELY ADDICTIVE!!! Could not stop eating it when I was there for the holidays 🤪
EM consumer stocks still come up alot in fund docs and research I cover from funds: https://emergingmarketskeptic.substack.com/s/em-fund-stock-picks
Herdez is a very interesting business. I thought about writing this one up a few weeks ago but to be honest I know very little about investing in Mexico. It's interesting to be able to buy a business with a well established portfolio of consumer packaged food products at this multiple and one that is heavily controlled by insiders.
I only knew of this one because Herdez salsas are almost as good as making them yourself. I had a Peter Lynch moment with this one.
I am pretty sure its their Guacamole https://www.salsas.com/herdez/products/salsas/guacamole-salsa-mild/ that's available in big jars (more like a runny sauce with a hint of lime flavor) in the Mexican store where I grew up - I could not stop eating it when I was there for the holidays 🤪
I linked to your post for my Monday link collection post: https://emergingmarketskeptic.substack.com/p/emerging-markets-week-march-18-2024 - Anyone who wants to do more investment "research": I am certain this is the Guacamole I could not stop eating when I visited my parents over the holidays: https://www.salsas.com/herdez/products/salsas/guacamole-salsa-mild/
Interesting idea! I lived for 5 years in Mexico and enjoyed these salsas. To my surprise - upon returning to England recently - there are some Herdez salsas stocked in major supermarkets here (a new development I believe). Mexican cuisine in general is still in a growth phase throughout the UK (and Europe I believe).
One thing that can't be overstated is the currency risk here. Mexican revenues still account for >90% of total revenues.
Interesting idea, thanks for sharing!
I'm digging a bit and I find VERY weird the Impulses segment, Why do they even try to be a retailer? seems like diworsification to me. Fun fact, they used to own two tuna boats, but they divested it back in 2020 and now the tuna is processed by a third party. Point being, they could find new ways to destroy capital, lowering the ROIC.
Very cheap and profitable anyway, so odds are high that this will work nice.
I'll be traveling to Mexico D.F. in a few months, so I'll do a channel check haha :)
Thanks for the idea! What would be your companies from other EM?