TAKING STOCK: Keep Bemis?

Dear Mr. Berko: I purchased 200 shares of Bemis Co. Inc. in 2002 at $29 and have a decent profit. I now have 517 shares because it split 2-for-1 in 2004, and I have reinvested all the dividends. My new broker has recommended that I sell this stock because it's a "boring dog" and I should protect my profits. GS, Syracuse, N.Y. Dear GS: Your $6,000 Bemis purchase is now worth $20,000 after 10 years. Your new broker is dumber than a feather duster. Though this stock seems to have been a laggard, don't you dare sell it, because the best is yet to come. Every dog has its day, and I think this puppy will surprise you. Bemis (BMS-$40) was founded by Judson Moss Bemis as a manufacturer of cotton bags for milled food and grain products when James Buchanan Jr. was in the White House. Today, 155 years later, this St. Louis company is probably one of the finest little-known public companies posted on the New York Stock Exchange. And it's fair to say that only 0.062 percent of male stockbrokers between the ages of 33 and 70 know that BMS produces packaging material for the industrialized world's food products from 78 facilities in 12 countries around the globe. BMS is a $5.4 billion global supplier of flexible and pressure-sensitive label materials with hundreds of impressive patents designed to improve operational performance, shelf life and sales while minimizing environmental impact. Some of its largest customers are PepsiCo, Kimberly-Clark, Boston Scientific, Hormel and Colgate. About 70 percent of revenues derive from the food industry - cheeses, breads, candies, chips, dried fruits, meats, mixes, condiments, animal foods, salads, ice creams, juices, coffees, etc. The remaining 30 percent of revenues derive from the pharmaceutical, medical, chemical and agribusiness markets. And it would be fair to say that, trading at 15.5 times next year's earnings, BMS appears to be a compelling, solid, conservative long-term investment with strong price stability and an above-average safety ranking. In fact, I'm gabberflasted that Fidelity, T. Rowe Price, American Funds, Dodge & Cox, Invesco, J.P. Morgan, Putnam and other prominent funds do not have significant positions in BMS. BMS produces a very necessary, important and extremely impressive product, and its aggressive research and development department is constantly seeking improvements to expand its uses and improve sales. The company's revenues, which have grown nearly every year since 1992 (when they were $1.4 billion), are very nearly impervious to recession, inflation and the economic cycle. Earnings have tripled, from 79 cents in 1992 to $2.40 this year, and the current dividend has increased annually, from 21 cents to $1.04, and currently yields a swell 2.7 percent. Now, considering there's been only a moderate improvement in the U.S. economy, Wall Street believes that BMS will grow its revenues five years hence to $6.6 billion, with an earnings target of $3.90 and a $1.30 dividend. Though not a "rah-rah, go-go" exciting issue, BMS continues to remain in your long-term dividend growth portfolio. I certainly would not be inclined to sell this stock, which may have more upside oomph than the market. Management has consolidated some of its key operations faster than some on the Street expected, which could add a nickel a share to 2014 earnings. And combined with the final closure of two old plants, management expects net profit margins to improve from 3.4 percent last year to a strong 5.8 percent in the coming five years. Meanwhile, its strong balance sheet, its significant $500 million annual cash flow and low debt have encouraged management to actively seek acquisition opportunities in emerging markets. And according to a BMS watcher at Vanguard, there's talk that management will begin expanding the company's markets in Brazil, Mexico and China. These new markets portend tremendous new growth potential for BMS and excellent appreciation potential for you if you maintain your position. KeyBanc Capital Markets, Thomson Reuters, Barclays, Morningstar and Deutsche Bank think BMS could trade at the $58 to $65 level by 2018, and I think they are right. ---------- Please address your financial questions to Malcolm Berko, P.O. Box 8303, Largo, FL 33775 or e-mail him at mjberko@yahoo.com. Visit Creators Syndicate website at www.creators.com. © 2013 Creators Syndicate Inc. Published: Wed, Jun 26, 2013