Consumer stocks are now as risky as they've ever been.
Unemployment's historically high, consumers are spooked, and
subpar earnings abound, as companies pay the price for lost
competitive advantage or fiscal irresponsibility. But tough
times can offer investors
the best chance to buy stocks.
Even if stock prices are low, investors still need to be
careful. Many companies simply won't survive the recession.
And even if you love an investment, it's always Foolish to
play devil's advocate, probing for its potential weak spots.
To keep you and your portfolio ready for anything, I've
highlighted two reasons to loathe packaged-foods producer
ConAgra (NYSE: CAG).
Subpar profitability
Last week, I
lavished love on ConAgralike so much salt and butter on a
bowlful of Orville Redenbacher. This time around, I'm doing
my best to skewer the maker of brands such as Chef Boyardee,
Marie Callender's, and Slim Jim.
Whether it's a high-flying tech name, an oil-patch player,
or a mundane consumer-staples company, a good investment
comes down to corporate profit. Now, food staples may seem
like a straightforward business, but there's plenty of room
for operating profit to fluctuate among competitors, in
everything from R&D and marketing expense to input costs,
inventory management, and plant efficiency.
In the table below, I've highlighted how ConAgra stacks up
against peers on operating margin, a measure of core business
profitability that excludes losses or gains associated with
interest, taxes, and extraneous items:
Company
Market Cap
Dividend Yield
Operating Margin
Price-to-Sales Ratio
ConAgra
$9.2 B
3.7%
9.3%
0.70
H.J. Heinz (NYSE: HNZ)
$11.9 B
4.4%
14.8%
1.12
Kraft (NYSE: KFT)
$41.5 B
4.1%
12.6%
1.01
General Mills (NYSE: GIS)
$19.0 B Continued... |