Armanino Foods of Distinction -- It just keeps rolling along

Of all the stocks about which I have written on this blog, none has gotten as much attention from me as Armanino Foods of Distinction (AMNF.PK). Like most stocks that trade on the pink sheets, Armanino does not give out enormous amounts of information that would make it easy to gage exactly what is happening at the company. My view of the future of this company is instead based upon the past performance of the long-time expert management and the previous results that they have achieved. Quarter after quarte, Armanino announces record earnings and/or sales. The dividend keeps being raised year after year. The geographic base of the company's market is growing. Management has said that there are a number of new product initiatives that either just came to fruition or are about to do so. And now, for the first time in recent years, there is serious buying interest in this stock. Indeed, the stock is up over 10% so far this year after rising by over 50% in 2010, and the volume continues to climb.

Earlier today I discussed with a colleague whether or not it made sense to reduce ones position in Armanino to take profits at this point. My colleague thought that with the price rise in the stock, it made sense to cut back his holdings by about 20%, and he has done so by selling in small amounts since the stock went past 70 cents. I disagree. In my opinion, Armanino is still undervalued. By any conservative account, it should earn at least 9 cents per share in 2011 which makes the current multiple about 9. Given the growth rate for the company, a P/E of 9 is ridiculously low. Indeed, were this stock trading on a major exchange, it would likely be much higher. My target for the stock is $1.30 during 2011.

I have a very substantial position in Armanino; the accounts I manage hold more than one percent of the company's stock. Even so, I am not going to take any profits at this point. The next earnings report should be out in mid February. If that report is as good as I expect, this stock has a long way up to go. Meanwhile, until the higher stock price gets hit, I will just continue to collect the sizeable qualified dividend.

Disclosure: I am long the stock with a substantial position.