I have always been intrigued by stocks that sell at a high-per-share price. Incidentally, the top few high priced stocks have been performing well compared to most other stocks. USAToday published this article about stocks above $300 per share. A majority of them are in the insurance industry. Interestingly, the article missed out a three-bagger, as Peter Lynch would call it, that is trading well above that price range.

I don't blame the author because essentially this stock has been flying under the radar for quite some time. And the good news is it still is. The stock I'm talking about is none other than the King of Hogs: Seaboard Corporation (AMEX: SEB).

The Motley Fool's W.D. Crotty has been following Seaboard for some time. Seaboard was first brought to his attention back in December 2004. At that time Seaboard was flirting with an all-time-high of a little over $1000 per share. Less than one year ago in August 2004, Seaboard was trading at around $500 per share. Today it is trading at $1600 per share. A 300% return in less than one year! You must think I'm crazy to group Seaboard under my Stocks That Stink category. The funny things is you could be absolutely right.

The Little Piggy Is Getting Fatter and Fatter
A quick glance at the revenue chart at MorningStar shows a steady growth between 1994 - 1999. In 1999, revenue dipped suddenly and so did the diluted earnings per share. Then it resumed its steady growth between 2000 - 2003. In 2004 it experienced a growth spurt which was attributed to higher pork prices (which accounts for 51% of revenue) and a three-times increase in its maritime segment earnings.

Who's The Piggy?
Let's dissect this little piggy and find out what it's made of. Seaboard's primary business is producing and selling pork to food processors and retailers. It also engages in shipping and trucking businesses. Seaboard also mills flour and feed and produces sugar and citrus. It has sugar and citrus plantations in Argentina. The company also markets wheat, corn and other commodities to Africa, South America and Caribbean. In addition, Seaboard operates an electric utility producer in Dominican Republic.

What I find interesting is Seaboard is 70% owned by Seaboard Flour, a private company that is 99.5% held by the Bresky family, the founder of Seaboard. Usually, I consider it a very good sign when management holds so much interest in a public company. That indicates management most likely has its interest aligned with the company shareholders'. Think Warren Buffet who owns 40% of Berkshire with 99% of his wealth invested in Berkshire.

So Why Not Put Money In The Piggy Bank?
Based on the numbers from the financial reports, I believe Seaboard is still undervalued even when it is trading at $1600+ per share. The numbers are very convincing. With a P/E ratio of 10 and EPS of $166.84, how could you not love this stock?

The stock has never split, another good sign. My opinion is that a stock that never splits is more focused on creating value for its investors. Why? By keeping the price high, less people will be able to afford trading the stock. Trading volume will be low. However, low trading volume usually means high volatility (think over-the-counter stocks). But because the price is high, the gyrations have little effect on the stock. Perfect for long-term investors like myself.

Behind The Cute Little Piggy Mask
After scrutinizing the numbers, I had my doubts about how Seaboard can sustain its growth. But at this price and growth, I might be willing to take on some risk. Then my unconventional digging turned up some dirty places the piggy had been to.

I found this article originally published in the November 1998 issue of Time magazine. According to the article, Harry Bresky, the present Chairmain, CEO and President of Seaboard was accused of "illegal and improper activity by Seaboard and other components of the Flour conglomerate, as directed by Bresky." These activities included improper diversion of corporate opportunities from Seaboard. Both parties settled. Seaboard Flour, the majority owner of Seaboard Corp ended up paying $10.8 million to Seaboard Corp. You can find out more from the article above. Remember the sudden dip in earnings in 1999? Well, it was investor losing confidence in Bresky.

I remember Howard Schilit, President of Center for Financial Research and Analysis (CFRA), once said something along the lines of "Once a fraud was discovered, more will surface." This was enough to convince me not to put my money in the piggy bank.

Am I jumping to conclusions? Let me know what you think.

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