Dean Foods Company (DF) is a supplier of high-quality, locally-produced dairy products. Our forecast for their future is very bullish. There are several trends to support this. Let's get into why we rate Dean Foods a buy. Primarily driving the long thesis is a combination of steady or declining raw milk prices and our forecast for reduced fuel surcharges on freight.
In addition, management is showing sensitivity to consumer trends toward organic and grass-fed. Brands such as Organic Valley Grass-fed Milk emphasize this and greatly contribute to higher margins as customers move up the shelf toward quality products. This healthy choice trend is large and growing as evidenced by big corporate activity in this sector, such as Kraft Heinz' (KHC) $200-M purchase of Mark Sisson's Primal Kitchen brand.