The human population is now topping 6.7 billion people. Yes that was a billion with a “B”, which equates to 4 babies being born every second. Quite staggering when you think about it... right?

We are now in a parabolic growth curve which only means more of us are required to share the real estate currently under your feet right now. According to the law of causality, all of the things we require to exist - or more appropriately coexist - are going to be increasing at the same parabolic rate.

Unfortunately for us, the basic commodities we take for granted everyday will eventually be of far more importance than an Iphone or keyword tags for a search engine. Consider the impact of 2 to 3 years of poor grain harvests due to droughts during summer months.  Hunger would quickly elevate the prices of these commodities as we are currently witnessing with the increasing probabilty that the US ethanol quotas will be tightening the current supply of corn.  As of this week (January 14th, 2008) corn has reached an all time high, and this happened without any type of unnatural weather patterns.  

This isn't intended to frighten, but to enlighten all of us upon the microtrends of change are becoming macrotrends of a permanent nature.

So what can we do to eliminate or reduce these types of events? Lets start by identifying a way to do more with less, and identify a streamlined corporation that provides a life sustaining resource... food perhaps.

<u>Sadia S.A. ADR</u>

Sadia (NYSE: SDI) is a Brazilian food processing company specializing in refrigerated and frozen protein rich products (beef, chicken, pork). From the farm to the grocery shelves, Sadia operates an all inclusive business that covers the gambit of meat production for Brazil, as well as being one of the leading food distributors in the world.

Literally translated as “healthy” in Portuguese, Sadia produces over 1000 different products worldwide. An estimated total of 2.6 Billion pounds of protein are consumed around the world each year thanks to Sadia and with the ever growing world population that number is sure to increase. Half of Sadia's products are consumed in Latin America, while the remaining 50% is shipped to its other customers in Asia, primarily China and India.

Despite a 90% return in 2007 and a 3 year return of near 200%, SDA is surprising cheap by posting a very conservative P/E ratio of 11.3 (Chart #1). However, SDA is much more than a growth company. It is also a prime example of a value stock for dividend investors, which happens to have a current dividend yield of 4.17%. Within a volatile stock market, it presents itself as a possible defensive stock as well.

Chart #1: 3 year chart of Sadia.

<u>The Numbers</u>

Sadia, like most large food companies, is not high paced growth company. It has a forecasted a 12% - 14% increase in sales for 2008, but did not give any guidance on EPS which could leave some extra “wiggle room” to sneak in an earnings surprise. When looking at Sadia's conservative management, its best to consider this a glass half-full versus the alternative.

Several other key numbers/ratios jump out that separate SDA from its competitors, such as:

• SDA has a Cost of Goods (COGs) result that is roughly 20% lower than its industry competitors. This is significant because it increases the net profit and EPS even if competitors achieve higher sales increases than SDA.

• The dividend growth rate is three times higher than industry competitors. Combined with a stock price that doubled in 2007, it makes SDA twice as attractive to mutual fund investors as a play on growth stocks, but also as a high yield dividend stock as well.

• Sales are roughly 28% higher than industry competitors over a 5 year basis.

• 3^rd quarter 2007 was 180% higher than the year over year quarter.

• Estimates range from only 10% to 17% of mutual fund or institutional ownership in this stock. Could be very significant if some type of positive news is released, and the investment managers begin to take notice of a solid growth company with little downside risk.

SDA is also a master of globalization. With partnerships in the United States, Russia, Asia, Europe, Africa, and the Middle East, its quite possible they could become the global standard of protein based foods in years to come. Sadia has maintained a high rate of quality, and therefore their products are well received. In many countries, their products are viewed as the best in their respective category.

<u>Summation</u>

Sadia is a well managed, international food company with a realistic chance of becoming the #1 protein supplier in the world.  It is growing quickly for such a large food based company, but this is due to its consistent ability to penetrate new markets, both domestically and internationally. Amazingly, it has integrated a well planned business model into the high tech western world as well as the emerging markets.

Impressively, the management team must be recognized for having the strategic foresight and sales skills to perform so well with an extremely diverse portfolio of clients.

The closing price of Sadia (NYSE: SDA) upon the publishing date (01/16/08) of this article was $56.98.

Disclaimer: Author does not have a position in Sadia S.A. prior to submitting this article. Always do your own research before making any investment based on a 3rd parties recommendation