Investment Column: Pork up your portfolio with Cranswick

Galliford Try; Renold

Our view: Buy

Share price: 755p (+19p)

Cranswick cooked up a surge in third-quarter sales yesterday, supporting its view that pork is back in vogue.

The company supplies the meat to Britain's four biggest supermarkets and discounters, which primarily use it for their own label lines. And yesterday it said consumers increasingly see pork as a healthy and cheap alternative to beef, lamb and poultry.

Still, as the worst memories of the recession recede, consumers appear to have started trading up to the grocers' premium own-label lines, such as Sainsbury's Taste the Difference (which Cranswick supplies), over the festive period. If a trend emerges, it would bode well for the recovery, indicating that consumers feel able to splash out.

Total sales at Cranswick soared by 31 per cent to £200m in the three months to 31 December. While sales were boosted by the acquisition of CCF Norfolk in June 2009 last year, Cranswick still boasted organic growth of 17 per cent at its underlying business.

Given that pig prices have been falling back, this means increased volumes are driving much of its growth. Further good news yesterday came from the unveiling of a joint venture with the TV celebrity chef Jamie Oliver to supply him with all the meat for his own range of fresh pork joints, marinated ribs, bacon and Italian charcuterie to be launched this spring in retailers. Shares in Cranswick took a buffeting in the first half of 2009, following scares over swine flu, but this had little impact on sales and, as its chief executive said yesterday, its profits and dividends have grown "unbroken" for 25 years. Certainly the shares, which trade on a forward 2010 price-to-earnings ratio of 11.6, look tasty for a company that operates in the defensive food sector with strong performing customers.

And with pork seemingly moving up the menu, we think Cranswick looks set to continue bringing home the bacon. Buy.

Galliford Try

Our view: Hold

Share price: 313.5p (-3p)

The news from the construction and housebuilding group Galliford Try has been getting better in recent months. The company was one of those hit by the struggles of the sector in the wake of the financial crisis, with many investors running as far away as possible.

A tepid recovery is on, however, with the company yesterday reaching the financial close on a £60m PFI project in Worcester. That follows Galliford Try's first-half numbers a fortnight ago when it said house sales, at £324m, were well up on the same period a year earlier. The company pronounced that it was "cautiously optimistic on the outlook for the housing market".

By contrast, investors have not been optimistic, cautiously or otherwise. As equity markets have made a strong recovery in the last six months, Galliford Try's stock has misfired, falling by nearly 20 per cent in the same period. Of course, there is the threat that most publicly funded projects could come to a shuddering halt when whichever victorious party eventually wins the general election finally owns up to what we can no longer afford.

That would, in itself, make us nervous about every group in the sector, but Galliford Try's numbers are not at all bad. The dividend yield, at nearly 4 per cent, is healthy, while the finance director, Frank Nelson, argues that on a sum-of-the-parts basis, the construction arm comes for free. Still, 14.5 times full-year earnings is not cheap, and we cannot help feeling a bit nervous about the stock. We wouldn't advise rushing to the exit, but now is not the time to buy, either. Hold.

Renold

Our view: Buy

Share price: 23.5p (+1.75p)

In November, Renold – the world's second-largest industrial chain-maker – judged that the sharp destocking that had bored a hole in its sales was finally coming to an end in Europe and might be expected to draw to a close in the US by the first quarter.

It appears to have judged correctly, according to yesterday's interim management statement. The company says it continues to see increasing stabilisation and some early evidence of recovery. Better still is the £26.9m share issue, also in November, the proceeds of which not only helped to pay off £11m-worth of bank debts and cut the group's overdraft, but also leave Renold in a good position for the "industry consolidation opportunities" it expects.

Renold has done a good job of getting its house in order over the last few years, although the benefits have been obscured by the downturn. That could change now that things are starting to pick up again, and trading on a forward multiple of just seven times full-year earnings, the shares sit on a very undemanding multiple. That being the case we feel confident in saying buy.