Q. Does it look like my good fortune with my H.J. Heinz Co. shares will continue? -- F.C., via the Internet
A. Frozen potatoes and soy sauce have never looked so good.
The global producer and marketer of packaged foods, led by strong gains of those two popular products, turned in a 12 percent increase in net income in its fiscal first quarter, ended July 30.
Sales rose at least 20 percent in every foreign region, producing double-digit earnings that compensated for a slump in sales to U.S. restaurants. The company generates about 60 percent of its sales outside the U.S.
Heinz intends to offer more than 400 new products within two years and increase its marketing budget by up to $100 million to support those items. Despite increases in the price of corn, wheat, dairy products and oils, consumers have not revolted against the resulting price increases in the firm's products.
Shares of Heinz (HNZ) are up 13 percent this year following a gain of 4 percent last year and 33 percent in 2006. Activist billionaire investor Nelson Peltz, whose Trian Fund Management LP owns about 4.9 percent of outstanding shares and led a proxy fight two years ago, is commending the company for doing a "phenomenal job."
This firm best-known for ketchup is anticipating major acquisitions.
"Campbell would represent a nice fit with the company," Heinz Chief Executive William Johnson said of Campbell Soup Co. in response to a shareholder question at the annual meeting. "We are always looking for opportunities to expand and grow."
Heinz recently completed its acquisition of Paris-based saucemaker Benedicta to increase its sauce business in France. It is hiring 350 workers at a new plant in South Carolina to make its Weight Watchers Smart Ones and Boston Market frozen meals.
The consensus analyst rating on Heinz stock is "buy," according to Thomson Financial, consisting of four "strong buys," four "buys" and three "holds."
After five years of restructuring and cutting costs, Heinz must compete with greatly improved private-label products of supermarket chains. There also might be a tipping point at which customers rebel against rising prices. Furthermore, the bulk of Heinz sales come from its top 15 brands, with many of its other items considerably less productive.
Heinz earnings are expected to increase 10 percent in each of the next two fiscal years. The five-year annualized return forecast is 8 percent versus 9 percent predicted for the major diversified food industry.
Q. My shares of Meridian Growth Fund seem to be doing OK but not great. What does the future look like? -- M.R.
A. Tamer than "go-go" growth funds, it has reasonable fees, an experienced portfolio manager and a good track record for its category.
These days, those are real pluses. Some of its long-term holdings that helped returns lately are discount retailer Ross Stores Inc. and heart-valve manufacturer Edwards Lifesciences Corp.
The $1.6 billion Meridian Growth Fund (MERDX) is down 8 percent over the past 12 months and has a three-year annualized return of 5 percent. Both of those results rank in the top one-third of all mid-cap growth funds.
"It is an interesting fund, and we recommend it, though don't think you're getting a super-momentum growth fund because you won't get it here," said Michael Breen, an analyst with Morningstar Inc. "It might not do as well in booming markets because it is not a typical growth fund."
Richard Aster, portfolio manager since the fund's 1984 inception, is what Breen calls a "hybrid," in that he focuses not only on growth but also investment quality at a fair price. Aster is president of Aster Investment Management Co., which he founded in 1977. Breen considers Aster to be more like Warren Buffett than like his growth-fund rivals.
Meridian Growth Fund, which would supply the small- and mid-cap growth portions of an individual's portfolio, takes a long-term perspective with low portfolio turnover. It looks for rapidly growing companies that meet its criteria of growth at a reasonable price. There is only moderate price volatility as it follows this consistent and cautious approach.
The demanding standards are the reason why it has a compact portfolio of only about 50 stock holdings, often in just a few sectors. Major portfolio concentrations include health care, consumer services, financial services and business services.
The fund's top holdings are C.R. Bard Inc., Dentsply International Inc., Ross Stores, FMC Technologies Inc., Edwards Lifesciences, RPM International Inc., Dionex Corp., American Tower Corp., Millipore Corp. and Zebra Technologies Corp.
This "no-load" (no sales charge) fund requires a minimum initial investment of $1,000 and has an annual expense ratio of 0.84 percent.
Q. Please settle a disagreement: Aren't most foreign stocks now available on U.S. exchanges, so there is no difference from buying a U.S. stock? -- P.R.
A. Investors putting money in foreign stocks often prefer mutual funds or exchange-traded funds because they offer diversity with a smaller investment.
You can buy individual foreign stocks that are available only on a foreign stock exchange through a broker that offers this service, though the charge is typically higher than for a domestic stock. Foreign companies traded only on those exchanges don't have to file reports with the Securities and Exchange Commission, so you must do more research. You also may receive your dividends in a foreign currency.
But American depositary receipts trade just like U.S. stocks. An ADR is a negotiable certificate issued by a U.S. bank that represents a specified number of shares in a foreign stock traded on a U.S. exchange.
ADRs aren't available for every foreign company, but there are about 2,000 of them that feel they can build a significant market because of their size and popularity. ADRs are denominated in U.S. dollars and reduce administrative and duty costs that would otherwise be placed on a transaction. Importantly, the companies offering ADRs must file financials here using generally accepted accounting principles.