Why I Like Associated British Foods Plc

The Motley Fool

As the New Year begins, I have been looking for new shares to invest in -- and one that's caught my eye is Associated British Foods (LSE: ABF). So for the rest of the year, I will be following the company's performance and conducting further research into its news and results.

A strong appeal of Associated British Foods (ABF) to me as an investor is its diversity: it has exposure to no less than five different markets -- namely sugar, agriculture, retail, grocery and ingredients -- which means that the firm should be less vulnerable to sector crashes than companies that are limited to dealing solely in one industry environment.

The ABF-owned retail chain Primark contributes over a quarter (around 27%) of total group revenue. It's known as a market leader in the value fashion sector, and has more than 250 stores across the UK, Republic of Ireland, Spain, Portugal, Germany, the Netherlands, Belgium and Austria.

As households tighten their purse strings in times of austerity, shoppers go in search of bargains and ABF has benefited: similar to the trend in food shopping, where businesses at the high and low ends of the spectrum have performed strongly and squeezed the margins of those in the middle, thus fashion-conscious customers have flocked to the high street's premium and budget retailers, including Primark.

Elsewhere, ABF's grocery sector provides 33% of group revenue, and the company owns many well-known brands such as Jordans, Ryvita, Twinings and Ovaltine, while it's highly likely you will have seen Silver Spoon packs of sugar around the supermarket -- another ABF-owned brand! I'm a fan of the investing maxim 'buy what you know', made popular by Peter Lynch, and if I have a bowl of Jordans cereal every morning with a cup of Twinings tea, then maybe it makes sense for me to profit from my regular custom?

I'll delve into the figures more closely in later articles, but the shares in the company have been consistently climbing year on year, ending the year on 1,564p as at 31 December 2012, and can currently be found trading for around 1,502p -- potentially presenting a buying opportunity.

Associated British Foods releases its first-quarter trading statement on Thursday 17 January, and I for one will be taking a keen interest...

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