Landec Corp (LNDC)

Companies are great investments for many reasons. The Potash's of the world are purchased on increased demand pushing prices through the roof. Honeywell is purchased because of its stability of earnings and large presence to a growing aerospace market. Diamond Offshore is interesting because of its huge shareholder returns with respect to dividends. Today's environment does not lend well to what most investors want and that is a home run stock. The kind of stock that not only do you have a ten bagger when it is all done, but you have bragging rights for all eternity that you made the pick that everyone missed. These companies are very hard to find, as many are bought with that type of growth and other just plain fail. The key to finding a ten bagger is having a technology that revolutionizes an industry. It generally takes time, but the Microsoft's of the world were not built in a day either, and most of the big winners here were... More Companies are great investments for many reasons. The Potash's of the world are purchased on increased demand pushing prices through the roof. Honeywell is purchased because of its stability of earnings and large presence to a growing aerospace market. Diamond Offshore is interesting because of its huge shareholder returns with respect to dividends. Today's environment does not lend well to what most investors want and that is a home run stock. The kind of stock that not only do you have a ten bagger when it is all done, but you have bragging rights for all eternity that you made the pick that everyone missed. These companies are very hard to find, as many are bought with that type of growth and other just plain fail. The key to finding a ten bagger is having a technology that revolutionizes an industry. It generally takes time, but the Microsoft's of the world were not built in a day either, and most of the big winners here were the ones that took a job from Bill himself.





History demands other things, like watching global wants such as the current green boom, where everyone is suddenly worried about their environment. This helps because legislation is passed and it can become mandated. It also must be better than current technologies and even better if it is less expensive. Lastly, it is nice if they are in a sector that looks to be progressing and that the current boom on their stock is lagging the sector.





Landec is a company that is very interesting going forward. In many ways they are like an agricultural biotech company, such as Monsanto. This company seems to have great things ahead and it seems very cheap with respect to growth possibilities. Their PE ratio sits at 15 and their PEG is .58. Their market cap is a mere $215 million. When the stock first came out all of the hype pushed its value to over $20 per share and even with a massive run up, the stock sits below half of that. Since October of last year the stock has had a major pullback in its current price. At this point, its looks to be way over done and the stock should be watched closely with respect to a high volume bottom before buying in.





Landec specializes in smart polymers. This technology allows plastics to be manipulated with respect to temperature, viscosity, adhesion, and permeability. Their commercial business includes Eatsmart vegetables, Chiquita-to-go in the US, personal care, catalyst products, seed coatings and adhesives in Asia through a co operational effort. Pre-commercial testing includes Chiquita-to-go in Europe, Chiquita fresh and ready, and military applications. Research includes large packaging containers, new targets, air products, medical and industrial applications.





2007 has shown a big turn around for this company and that is why I am starting to get real bullish. Technology based revenues were up 14% year over year. Last year they achieved record earnings, but one has to realize they had a big benefit from the sale of a company. Earnings were $29 million up from $9 million in 2006. Current, ongoing businesses were up 70% increasing their cash position four-fold. The company also has no long term debt. With the large increase in their core, money making business it should keep the company growing until they hit their homerun with one of their technologies.





Currently, their Apio food business is expanding nicely. This is a permeable packaging system for vegetables that allows the product to breath while protected from other elements that causes them to spoil or get dirty. Their packaging with respect to Chiquita bananas looks to have remarkable growth. Currently, their collaboration allows shelf life to increase by one week. All of this with very little implementation within the grocery store market, this looks to change as they are planning a major push into these venues now that they know their technology is working well. Europe is currently looking to OK this use, and things look good, plus it should increase growth going forward. This system looks to be implemented with respect to the military, they are currently investigating the technology and how well food will last with the packaging in extreme environments, so soldiers are able to pack fresh food in some instances.





The seed technology business is also being expanded and is another possibility with respect to a home run. They signed two agreements with Monsanto. The first was to sell their seed business to Monsanto for $50 million in cash. The second they entered into a co-exclusive agreement for five years to use Landec's seed coating technology and in return Monsanto will pay Landec $5.4 million per year in revenue and earnings, plus pay all costs to market and use it worldwide. This contract got my attention, mostly because of the licensing deal to use their product. With the growth and cash Monsanto is making, I would not be surprised if they either buy the technology outright or the whole company.





Licensing seems to be the way that Landec is going with their new technology; they signed an agreement with Aesthetic Services for use as dermal filler. They also signed another deal with Nitta for temperature-activated adhesives in China. Landec is going to continue to find ways to sell its technology, and create new patents.





Going forward the company has highlighted five things going forward they are concentrating on. Their first concern in is to continue to grow revenues, earnings and cash flow. The second is expand their Chiquita packaging technology into major retail locations and even worldwide. The third is to take that same technology and move it to other fruits and vegetables. The fourth to continue to grow their technology currently used with Monsanto and lastly to find new licensing agreements for all of their technologies.





The reason Landec is exciting is that they have two technologies that are either being used or having possible explosive growth. Down the road, Landec has stated that they may be able to decrease land fill substantially, as they are working on a plastic technology that will degrade slowly over a couple of days as temperature increases. This could be a huge thing for Landec as they could use this technology in many different applications, but most suitable in the produce area. All in all, they have great prospects going forward and should continue to increase in stock price as they seem fair valued at today's prices.