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|Subject: Hansen Corporation||Date: 2/22/2006 9:50 PM|
|Author: pencils2||Number: 11 of 18|
HANS has been the best-performing stock of the past six years, but I think it can keep going, at least for now. I think that the market they are in is growing at a nice speed, they are a leader, I don't think their great sales will slow down just yet.
Hubert Hansen and his three sons founded Hansen Natural in 1935. They sold their natural drinks to film studios and retailers under the Hansen name. Then, in the 1970's, Hubert's grandson Tim developed and marketed an array of natural sodas that were shelf-stable and 100% juice. Hansen has been around for more than 70 years; they know what they are doing. This is a classic Tom Gardner stock, IMO, because of the old, experienced business in a growing market. Through its subsidiaries, Hansen engages in the development, marketing, sale, and distribution of beverages in the U.S. and Canada. Hansen markets its products under the names Hansen's, Monster, Blue Sky, and Junior Juice brands. Monster drinks are very addictive and that is Hansen's main product line: Energy drinks. Blue Sky is a leading producer of natural soda, a great company for Hansen to own. The products under the Hansen's name are also natural sodas, many are diet natural sodas. Hansen's owns the leaders, I really think this company will someday be the "Coke" of natural drinks.
Hansen in this market with these brands:
Controlled Label Energy Drinks:
The energy segment makes up 72% of YTD gross sales as of Sep. 30, 2005. Go down to competition to see market share chart.
The energy drink is the fastest-growing segment in the U.S. beverage industry, this gives Hansen a huge opportunity. Lost is the brand that mostly appeals to high school and college students, but Monster is the fastest growing energy drink in the U.S.
Hansen is the category leader in the energy drink segment, this really explains Hansen's great performance over the past 6 years
This is the segment that Hansen really is a leader with less competition, just with these brands:
Blue Sky is the leading natural soda in the health-food category.
Hansen is the leading natural soda in the U.S.
Hansen's are first shelf-stable smoothies in the U.S.
Hansen's 64 oz. Apple Juice is the number 1 selling shelf-stable bottled juice in California. Other of their 64 oz. juices are widely known and are best sellers, Hansen Corp. says there are great opportunities in the distribution segment.
Market Cap: 2.01 Billion
Hansen has been making more and more money rapidly, creating a concern when the growth slows down. I think Hansen still has so much more room to grow and expand its product line, there's also talk that PepsiCo, Coca-Cola, or Starbucks might purchase the company. At this time I don't think Hansen's would sell the company, there is so much more opportunity left that it just doesn't make sense to sell now.
Since 2000, Hansen has an annual growth rate compounded through 2004 of 27.5% in gross annual sales. A comparison between the 9 months ending Sep. 30, 2004 and Sep. 30, 2005 show: he business grew from $162.3M to $301.8M dollars in gross sales, 85.9%.
PERIOD ENDING 30-Sep-05 30-Jun-05 31-Mar-05 31-Dec-04
The inventory has been growing steadily, but not rapidly. As long as Hansen keeps increasing cash flow more than inventory, I feel comfortable. I'm not sure how the Fool views this, but obviously you want more inventory if you're product line is selling at a great speed, right? Now lets look into the liabilities, the liabilities, understandably, have grown also. But cash is growing much faster than the liabilities; so this isn't really a problem, of course we need to keep a close eye to make sure the company is paying off debt and making a profit, which Hansen has.
PERIOD ENDING 30-Sep-05 30-Jun-05 31-Mar-05 31-Dec-04
For the most recent quarter, Hansen had $49.93 million in cash and only $730.93K in debt, so the cash/debt ratio is definitely not a problem. Hansen has continued to make money and keep the debt down, I would really feel comfortable sleeping at night with this great corporation in my portfolio.
Hansen's insiders own 23.07% of all shares outstanding, institutions 48.7%. While I'd rather have it the other way around, this isn't a "Hidden" company anymore. If institutions owned around 60% of the stock, I would be worried. But 48% really isn't all that bad, because that is between a diversified amount of institutions, so if a shareholder vote came up it wouldn't just be banked on what the institutions wanted. I really don't see this as a problem in my book, but people have their different opinions on share ownership, please comment freely.
Insiders sold less than 1% of their shares over the last six months, again, this isn't really a problem. Insiders want to diversify their portfolios also, so unless there is heavy insider selling I am not worried.
This segment of the analysis is a bit tough to explain in a short overview, but I will do the best I can.
First, let's start with energy drinks market share, here is some table-data with those statistics. This is the market share for the brands, not companies.
Market Share - Energy Drinks, ()=Share Change
With the brands Hansen, Lost, and Monster I get a total market share of 19%. Right now the competition is mainly from Red Bull and Rockstar. But, Monster is gaining market share rapidly while Red Bull is losing it, Rockstar is gaining slightly.
In the natural soda segment, the Hansen and Blue Sky brands are the two leading brands, I see no serious competition in that segment.
The juice segment, hmm, the smoothies are excellent, I've never tried the juice though. This isn't really a big part of Hansen's business, but they see lots of growth opportunity, we'll see how that works out. Right now I am more focusing on the other segments, as those are the segments that they are really focusing on at the moment.
As for Coca-Cola and PepsiCo, Schweppes etc, they are not really in the segment of the beverage market that Hansen is, but they might get into the market by purchasing Hansen's. I hope not, because I believe Hansen is a top-notch company with lots of growth and expansion ahead of itself.
The main risks that I see are: This stock is followed closely by analysts, the growth takes a sudden stop, and Coca-Cola or a large business enters the game seriously.
Okay, the analysts make this stock volatile. Just a month ago, Hansen's got an upgrade by Citigroup to an expectation of $130.00. HANS share price went up from the $90 area to above $100 in one day! Since that point, HANS went down to $80, and now is back above $90. The point is when an analyst makes a move on HANS the stock will be bouncy. Tomorrow an analyst could lower expectations by $10 and the stock could fall $20. There will be movements, but long-term this will be a great holding. As a just mentioned, the stock is now at the same levels as it was when Citigroup initiated the upgrade, so just be patient, and long-term this will be a great buy.
I do not believe the growth will slow down at all in the next 2-3 years. Why? Because I showed you earlier, they are gaining market share in the energy drink market, lead the natural soda segment, and have excellent financials. They also see good opportunity in the juice market, who knows? That might be their major market someday. Growth will be something to watch, but it won't be slowing down any time soon, in my opinion.
As for a major company entering the market, the share price could get a short-term tumble, but Hansen's has a great start and they have been in this field for 70 years. The company won't be affected in long-term growth, this is a business that has survived for many years and will survive for many more. I also think if a large, or small for that matter, company wanted to enter this field they would purchase Hansen's, not try to compete, but for now HANS is in a great position for the long-term.
For Further Research:
SEC Overview (Extremely Informative):
Web Site: http://www.hansens.com/
This concludes my write-up. After doing this research I like what I see very much, but I really like that A) Monster is gaining market share as fast as Red Bull is losing market share, B) They haven't gone into the international market yet (Except for Canada), I think they would do very well in foreign markets, and C) This is a very well run company with a history of releasing great products, I believe they will do continually do this well into the future.
Thoughts, comments, questions are all welcome.
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