Billionaire Ken Griffin Tries WhiteWave’s Soy Milk

According to a 13G filed with the SEC, Citadel Investment Group owned 1.2 million shares of The WhiteWave Foods Co (NYSE:WWAV), giving it 5.4% of the outstanding shares of the company. Citadel is managed by billionaire Ken Griffin. WhiteWave, a recent spinout of Dean Foods Company (NYSE:DF), sells plant-based and organic dairy products. The company was spun out in late October, and is down 10% since that time; since Citadel’s most recent 13F filing was in September (see Griffin’s favorite stocks), before WhiteWave became a separate company, we don’t know when it started buying shares.

The WhiteWave Foods Co has stated its financial results as if it were a separate company for the third quarter of 2012, the first nine months of 2012, and the comparable periods in 2011. Of course, it’s possible that there have been errors or judgment calls in the presentation of these financials, and we would be wary of placing too much emphasis on them. Net revenue was reportedly up 13% last quarter versus a year earlier, carrying net income (ignoring a non-controlling interest from last year) 44% higher. The growth rates are similar for the nine-month period. Nearly all of WhiteWave’s growth came from North American operations, with the smaller European business struggling.

Wall Street analysts expect 60 cents per share of earnings in 2012, and then moderate growth next year resulting in a forward P/E multiple of 22. The high growth in alternative dairy products (such as soy or coconut milk) and organic dairy products was part of the logic behind spinning out The WhiteWave Foods Co from the more ordinary Dean Foods. In addition, the spinout should leave management better able to focus on the company’s products (read more about spinouts and why hedge funds like to invest in them). However, the most recent data shows that 13% of the outstanding shares are held short. The earnings multiple does look high, and while we would expect growth at the company we are skeptical of the accuracy of the financials and worry that the market may be depending too much on operational improvements. We expect that we will know more once WhiteWave releases results for the fourth quarter, during most of which it was an independent company.