This column is for investors willing to take more risk and potentially receive more reward.  The stocks mentioned in this column are not recommended to buy or sell.  They're brought to your attention so you can investigate them further to determine if they fit your risk profile.  Most of the stocks will have less than $1 billion of market capitalization, have more volatility than other stocks, and oftentimes no earnings.  And some will have tremendous stories.

November 6, 2009 - J&J Snack Foods, Inc. (JJSF-NASDAQ) through its subsidiaries, manufactures nutritional snack foods, as well as distributes frozen beverages to the food service and retail supermarket industries in the United States. The company primarily offers soft pretzels, frozen juice treats, desserts, churros, and baked goods to snack bars and food stands in chain, department, and discount stores; malls and shopping centers; fast food outlets; stadiums and sports arenas; leisure and theme parks; convenience stores; movie theatres; warehouse club stores; and schools, colleges, and other institutions.

J&J Snack Food has a price chart that most stocks envy. Basically from the beginning of 2003 until the beginning of 2007, the price went ever higher. Then it hit a bad year, went down for 12 months, going from a high of $43.50 at the beginning of 2007 (then an all-time high) to bottoming at $23.40 in early 2008. Since then the stock has regained all of its ground and reached another new high of $44.75 in July of this year. It's currently trading a little below that at $40 a share.

In spite of the economic troubles, J&J is posting solid gains in revenues and profits. Last year, it finished with $653.05 million (fiscal year ended on September 26), up from $629 million in 2008. Next year, look for $682.25 million. Much of that success goes to the company's multichannel distribution network. For example, sales to sporting events and theme parks were weaker this year. Improvements came at warehouse and dollar stores. In the June quarter, retail supermarkets revenues rose by 22%, suggesting consumers are spending more for at home treats.

Here's the report for the fourth quarter and full year, released on November 3: Sales for the fiscal year ended September 26, 2009 increased 4% to $653.0 million from $629.4 million in the fiscal year ended September 27, 2008. Net earnings increased 48% to $41.3 million in fiscal 2009 from $27.9 million in fiscal 2008. On a per diluted share basis, earnings increased 50% to $2.21 from $1.47. Operating income increased 54% to $66.9 million this year from $43.3 million in the year ago period.

For the fourth quarter ended September 26, 2009, sales increased 3% to $182.8 million from $177.4 million in the fourth quarter ended September 27, 2008. Net earnings increased 32% to $14.8 million in the current year quarter from $11.2 million. Earnings per diluted share were $.79 this year compared to $.59 last year. Operating income increased 33% to $23.8 million from $17.9 million in the year ago period.

Gerald B. Shreiber, J & J's President and Chief Executive Officer, commented, "Continued strong and improving performance from all our business groups contributed to our results for the quarter and the year. Country Home Bakers, our cookie, biscuit and specialty bread business, had an outstanding year. Overall, we benefitted from cost containment while driving sales value."

To keep up with consumers' ever evolving tastes, the company is re-formulating some of its products, cutting out more of the sugar and trans fat. The changes also make their food compatible with school food service guidelines. Another segment will get more focus: the Latin market. J&J will introduce new products specifically flavored for that group.

More numbers: Price to sales is 1.11. Price to Book is 2.21. Book value is $17.73 a share. Operating margin for the last 12 months was 9.39% while the Profit margin was 5.82%. Return on equity was 11.92%. Total cash per share is $4.40. Total debt is $404,000, less than 1% of capital. Current ratio is 2.7. Beta is a relatively mild .86. Total shares outstanding are 18.45 million. The float is 12.89 million with insiders owning 22.73% of the stock. Institutions own 65.40%. There is a 39 cent dividend for a yield of 1%.

There's a good story here. The recent earnings release confirms it. Investors already believe. They bid up the price of the stock by 30% in the last 8 months. Is there more room left on the upside? If the company keeps reporting strong earnings growth, it sure looks that way. But there was a year when the stock took a break: 2007. And it lasted all year. So be aware that the path will most likely not be straight up. Aggressive investors will find time spent with this stock worthwhile.

- Company Web site: www.jjsnack.com

- Ted Allrich