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If you are a shareholder of either TSN, HRL, SAFM or PPC this chart is disturbing. Collectively, the gross margins for this industry are below 7%. With gross margins that low how is it possible that they can make any money at all? Clearly, the only way to improve profitability below the gross margin line, is to manage your labor costs efficiently. Apparently some companies are! Yesterday, CNN ran a story about a slaughterhouse being charged with violating child labor laws.

According to CNN, the owner and managers of the nation's largest kosher meatpacking plant were charged Tuesday with more than 9,000 misdemeanors alleging child labor law violations. The company is accused of hiring minors and, in some cases, having children younger than 16 handle dangerous equipment such as circular saws, meat grinders and power shears.

I’m confident that the slaughterhouse 4 would not risk their business on such stupidity, but it highlights the fact that gross margins hold the key to the future of these stocks.