Mama Mancini's
FY 2020
By Manuel Maurício
April 30, 2021
Mama Mancini’s is the Portfolio‘s largest position right now, accounting for 12%. Recently, Gonçalo Garcia asked me what the moat was. I told him there is no moat. I know how this sounds. I would also lose interest after listening to a pitch for a “meatball company”.
But the truth is that people love the meatballs (and the other products) and that’s showing on the recent and growing authorizations with major US retailers. It’s like asking what’s Heinz moat, or Hormel Food’s moat. I don’t believe there is one. In fact, the food companies have been beaten down in recent years due to the rise of private labels, the democratization of advertising, etc, etc.
But that doesn’t seem to be affecting Mama Mancini’s. Yes, it’s true. This might stop one day. But right now the execution has been top notch, and the runway is looonnggg. As I’ve written several times before, Carl, the CEO, has been looking to enter the food service business for a while now, and the food service business is H-U-G-E.
Just look at Armanino Foods of Distinction. The company makes pesto sauce, and its clients – restaurants, hotels, schools – keep coming back day after day, year after year.
Mama Mancini’s will also be listing on the Nasdaq soon (from the Over the Counter market). With such a small float (number of shares outstanding available for trade after discounting Carl’s shares plus AltaFox shares) it’s likely that the share price will go up just because more people will be able to buy them.
May I remind you that the company was able to grow sales by 20% even while the delis and hot bars were closed? The opening of both will help sales increase even more in the next periods.
Also, in 2020 the company has doubled its QVC business and Carl expects “significant growth” this year.
On top of this all, Carl has mentioned that “new capacity would probably be needed in 18 months”. Now, the company just did $41 million in sales and the plant’s capacity is $75-$80 million. This tells me that Carl is expecting to double the amount of sales in the next 2 years!!!!!
And as if this wasn’t enough, the company now has Connor Hailey – regarded by many as the best microcap investor out there – on the board of directors in charge of finding the right acquisition target. That’s music to my ears.
Carl mentioned that they have been looking at several different companies, but so far, they’re either too small, too hard to integrate, or too expensive.
“If our volume grows very substantially as we hope, we may have to look for an expansion of facilities some time past this year.” Carl Wolf CEO
Let’s say that the company is able to get to $70 million in sales in 2023. Note that I’m being much more cautious than what the management has guided for so far. At that rate, the net margin will be 15%, which would get us to earnings per share of about $0.29. If we apply a conservative multiple of 15x and add back the cash generated until then, we could be seeing a share price of $4.3, representing an annualized rate of return of 20% from where we are today.
Could this be higher? Undoubtedly. As I said, I’m being cautious. Want to know the conclusion? I couldn’t be happier with my current position in Mama Mancini’s.
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