Wayne, The food group has zero pricing power and only cheap commodity prices are keeping them afloat. However, some of the names you mention look very good on a relative basis. But I've been buying some of this stuff about as cheaply as the internut freebies, and I have to wonder about there profit margins. For example, I stocked up on Campbells Chunky and Progresso soups last week. They were both selling buy one get one free, and I had triple coupons out the wazoo. Net, net, I was able to buy Progresso soups 2 for $1.50 and had $1.05 off in coupons. I don't really think they can sell soup for 22 1/2 cents a can and make any money. And it will be months before I need soup again. The Campbell's deal wasn't quite as good, about 50 cents a can all in. And I had a similar run with Smucker's jelly.
So, many of these cos. are taking actions similar to any slow growth industry, offering incentives with loss leaders. Those who don't give good deals don't sell anything. However, I don't see where the margins are going to come from.
So, you need consolidation and an end to cutthroat pricing, and I don't see that coming soon.
The stocks are relatively cheap and I would probably opt for good quality takeover candidates, if you can find any. |
