The Pilgrim's Portfolio

While Internet and technology stocks have soared in value in recent years, food companies like Pilgrim's Pride have been ground into chicken feed. For an example, look at a company like Yahoo!, the Internet portal. Last year, the company had sales of $588 million. Pilgrim's Pride had sales of $1.3 billion. Yet, by the middle of last week, Yahoo!'s market capitalization (the total value of the company, figured by multiplying the number of outlying shares times the share price) was $30.3 billion. By comparison, Pilgrim's Pride, which had more sales and more profits than Yahoo!, had a market cap of just $184 million.

The reduction in Pilgrim's stock price, which was over $15 per share in mid-1999, has cost company chairman Bo Pilgrim tens of millions of dollars in net worth. But the chicken magnate remains undisturbed. "Wall Street does not like any of the food companies," said Pilgrim calmly, while predicting that investors will eventually come back to food stocks like his.

In the meantime, Pilgrim is not sitting still. In September, the company announced that it will acquire WLR Foods, the 12th-largest chicken company and fourth-largest turkey producer in America, for $300 million in cash. When the acquisition is completed in January, Pilgrim's Pride will be the second-largest chicken processor in America, and will be producing 3.2 billion pounds of poultry every year. But it will still trail far behind market leader Tyson Foods Inc., the Springdale, Ark.-based giant that had 1999 sales of $7.6 billion and markets its products -- chicken, Cornish game hen, tortillas, animal feed, and pork -- in more than 60 countries. Tyson's share of the domestic chicken market is 24%, about three times Pilgrim's market share.

Although the acquisition of WLR will likely reduce earnings per share at Pilgrim's for the next few quarters, the company is still viewed favorably by William Leach, a stock analyst with Donaldson, Lufkin & Jeanrette. In a Sept. 29 report, Leach said Pilgrim's stock continues to "look very undervalued and we are thus maintaining our buy rating."

While Pilgrim's Pride is getting some positive coverage on Wall Street, Pilgrim predicts it may take three to six years before his company gets the recognition -- and value -- he believes it's worth. "It'll be slow because we got bombed by these high tech investments, and people pulled their money out of commodities," he said. But when the market meltdown comes -- and Pilgrim believes it will come -- investors will begin eating up Pilgrim's again. And the Pilgrim's Pride founder has plenty of faith in that eventuality, asking, "Do you know anything that will replace food?"

Sex, I suggested, might at least compete with food. "Sex maybe," Pilgrim said. "But you will eventually get hungry."