I like the look of FTSE 250 incumbent Cranswick (LSE:CWK). Should I buy shares for my portfolio at current levels?
FTSE 250 meat producer
Cranswick is a leading UK-based food producer. It specialises in pork, sausages, cooked meats, poultry, bacon, and pastry products. As well as producing these products, it then sells these to retailers across the country and has expanded into the international market with a customer base abroad too.
As I write, shares in Cranswick are trading for 3,632p. At this time last year, shares were trading for 3,624p, which means at a similar level to this year. Shares had reached over 4,000p a few months ago but have dipped since. I believe this is due to current macroeconomic pressures as well as the fact insiders have sold shares recently. I believe, at current levels, the FTSE 250 incumbent represents good value for money.
Why I like Cranswick
In times of economic uncertainty and volatility, investors turn to defensive stocks. This is because such stocks have consistent demand for their products, as well as robust balance sheets and lower risk. Food production stocks are considered defensive. No matter the economic issues, people will need to eat and therefore foodstuffs will always be in demand. As a well-established provider of meat-based products, Cranswick has good defensive traits.
Cranswick has a good track of performance historically and recently. I understand past performance is not a guarantee of the future. I still tend to review it as a gauge nevertheless. The past three years have seen year-on-year increases in revenue and gross profit. Cranswick’s most recent trading update in July for Q1 was good. Revenue was up nearly 10% compared to the same period last year.
I like my picks to make me a passive income and Cranswick ticks this box too. Upon reviewing its dividend yield, 2% doesn’t grab my attention and is lower than the FTSE 250 average. But when I dig further, I see there is more to it than meets the eye. Cranswick is a good source of rising cash returns and has a solid growth rate of over 13% per year. It has also delivered capital growth for a few years consistently now. With Cranswick’s positive performance and growth, I expect a regular and increasing dividend payment for years to come if I buy shares.
Risks and verdict
Cranswick does not come without risks, however. Current macroeconomic pressures could affect the FTSE 250 incumbent. First, rising inflation could affect the cost of materials and operations. This cost could affect margins and if passed down to customers, could affect relationships. Furthermore, the supply chain crisis in the UK could hinder progress as well. Finally, the rise of meat alternatives and veganism is something to consider that could affect Cranswick’s progress too.
Overall, I would happily add Cranswick shares to my portfolio at current levels. I believe it is an excellent defensive stock with a good track record and a solid position in its respective market. I am not worried about the risks mentioned in the longer term.