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Warren Buffett’s arguably one of the best investors in the world. His knack for identifying long-term winners has translated into a phenomenal track record of building enormous wealth for himself and Berkshire Hathaway shareholders.
Even in 2024, with a market-cap approaching $1trn, Buffett and his team achieved a 25.5% return across their investment portfolio – almost five times what the FTSE 250 delivered in the same period. And yet, one British business from the UK’s flagship growth index – Greencore (LSE:GNC) – vastly outperformed the ‘Oracle of Omaha’ with a return greater than 100%!
Profiting from sandwiches
Being a convenience food manufacturer isn’t a high-margin enterprise. However, that hasn’t stopped management from seeking novel methods to boost profitability. Specifically, the company has been rolling out artificial intelligence (AI) and automation solutions to optimise production and reduce spending. And the impact of this has been laid bare in its latest interim results for six months leading to March.
Underlying operating margins jumped from 3.3% to 4.9%. That may not seem like a massive difference, but when scaled to almost £1bn of revenue, it’s enabled Greencore’s earnings to skyrocket by 60% to £45.2m. At the same time, free cash flow generation has returned to positive territory by £37.8m, translating into a 78.6% cash conversion ratio, up from just 36.7% year on year.
Put simply, the business is firing on all cylinders. So much so that it’s just begun the process of gobbling up a key competitor (Bakkavör) in a £1.2bn acquisition deal to become the largest chilled convenience food business in the UK.
In 2024, shareholders reaped an enormous 105% return – four times more than Buffett achieved. And so far in 2025, the shares are already up 15%, with another 12% gain on the horizon if analyst forecasts prove accurate.
Can Greencore continue to win?
This boring but lucrative company certainly sounds like the type of stock Buffett has historically hunted for. After all, sandwiches and other chilled foods don’t tend to grab headlines, making Greencore an under-the-radar value stock in 2024.
Today, the business is definitely turning a few more heads, especially with its plans to dominate its target markets. And if management continues to hit key milestones in its expansion strategy, more growth could be just around the corner.
Bakkavör has several complementary product lines that Greencore will be able to offer to leading UK retailers including Tesco, Sainsbury’s and Marks & Spencer. Not to mention, Bakkavör’s international presence in the US and China opens the door to new markets and opportunities. However, mergers of this scale can also be quite problematic.
If the deal is approved by regulators and shareholders, it’s expected to be completed before the end of 2025. But the process of integrating and optimising operations will likely take far longer, especially for a deal of this scope. Should integration prove to be more challenging than expected, margins could face significant pressure, undoing a lot of the progress that’s been made to date.
In other words, just because Greencore beat Buffett in 2024, that doesn’t mean the stock will do the same in 2025. I’m cautiously optimistic about the long-term trajectory of this business. But having experienced the chaos large acquisitions can potentially cause with other investments, I’m keeping this firm on my watchlist for now.
