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If the above conditions are true and there are will most likely not be any great price fluctuations (nor interest fluctuations), then might it perhaps be more advisable to buy and get the higher yield if SJM is fully-valued

Over the last year SJM has gone from about $24 to $36 for a 50% gain. The earnings growth over the last few years (from the figures someone, I think yofluke provided on this board) has averaged about 5%. Looking at a one year log chart, there have been about 6 times the price has declined by more than 5%. It seems as if your hypothesis is incorrect.

I'm not really sure that it is incorrect at this point. This year has been quite different from the usual SJM year with the acquistion of JIF and Crisco.

Ok, lets have a look at a two year chart. They went from $18 at the end of Aug 2000 to $27 at the end of Aug 01 for a 50% gain. (Remember I am just reading off a chart, so the numbers may not be completely accurate - especially since I have the stock price at both $24 and $27 one year ago!) I count 7 periods of major decline in that year. There's nothing unusual in this - stocks go down 5% or more all the time. But you can't rely on the stock price being very stable.

There is some uncertainty as to the future cash streams of the company because in the beginning SJM originally projected 2x sales, and ~3x earnings after the acquisition was integrated, but recently changed to 2x/~2x.

IMO, SJM is a little overpriced at the moment, based on the figures presented on this board and completely ignoring the acquisition. Taking the uncertainty of the acquisition into account I would require a higher margin of safety. Acquisitions are always projected to do wonders for a company, words like synergy and paradigm are bandied about, but it rarely works as well as expected.

Hamish Rose
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