A: The world's largest cereal-maker has powerful brands and a knack for introducing successful products.
IN THIS PACKAGE
- Couple faces drastic changes to stay afloat
- Take steps to help get your finances in order
- Housing problems are far from over
- Salvaging a portfolio hit in early retirement
- The savings game
- The Leckey file
- Getting started
- Spending smart
- Can they do that
- Taking stock
- Unusual funds often suffer from similar sorts of pitfalls
- The week ahead
- Andrew Leckey
Jan. 13: Mattel's offerings are playing well in overseas markets
Jan. 6: Sun Microsystems remains a work in progress
- Consumer Goods Industries
- Earnings Forecasts
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Second-quarter profits increased 13 percent on North American and European gains, with sales rising 9 percent. Even with commodity costs rising, the company is standing by its full-year earnings forecast.
But the highly competitive food industry remains challenging.
Under pressure from parents and nutrition advocacy groups over childhood obesity, the company recently announced it will institute new nutrition standards for cereals and snacks. If it is unable to match the taste of its products, it said it won't change the products but will stop marketing them to children under age 12. It also agreed to restrict advertising that uses licensed media characters such as Shrek.
Like other packaged-food companies it raised prices for many products in reaction to higher cost of wheat, corn, rice and cooking oil. One plus is that the Department of Agriculture estimates that farmers have planted 19 percent more acres of corn than expected, which may provide some relief.
Rising milk, fuel and energy prices have further put a strain on the industry.
Kellogg stock (K) is up 5 percent this year following a gain of 16 percent last year. It recently increased its quarterly dividend by 6.5 percent, payable on Sept. 14 to shareholders of record as of Aug. 31.
It has a strong chief executive in David Mackay and has enjoyed several years of solid sales growth. Nutrition-oriented products such as Special K meal-replacement bars and beverages are doing well, particularly its single-serve 100-calorie packs.
The consensus rating on shares of Kellogg is currently "buy," according to Thomson Financial, consisting of seven "strong buys," eight "buys" and six "holds."
Kellogg employs about 26,000 people worldwide and is investing in manufacturing and distribution improvements. It will record up to $85 million in charges from reorganization of its delivery operations in the Southeastern U.S. through relocation or cuts of about 300 jobs.
Earnings are expected to rise 10 percent this year compared with 7 percent forecast for the processed and packaged goods industry. Next year's projected increase is 10 percent versus 13 percent expected for its peers. The forecast of a five-year annualized growth rate of 9 percent is in line with the industry.
Q: Are there any good reasons to invest in Fidelity Canada Fund, which has done so well? What's up with that? -- R.M., via the Internet
A: As an international force in energy, metals and mining, Canada benefits greatly from the boom in natural resources.
The strong Canadian dollar and the economic boost given large Canadian banks from increased deposits and loans have helped the country's stocks.
The $3.8 billion Fidelity Canada Fund (FICDX) has had a total return of 31 percent over the past 12 months to rank in the top 10 percent of all foreign large growth and value funds. Its three-year annualized return of 30 percent places it in the top 3 percent of that category.
"If an investor wants a Canada fund, this fund is pretty attractive and there isn't much competition," said Dan Lefkovitz, analyst with Morningstar Inc. in Chicago. "However, if the commodity boom loses its legs, if the Canadian dollar weakens or if the Canadian economy slips, this fund could have a really tough time."
Because it is restricted to a single, relatively small stock market that can be volatile, Lefkovitz cautions investors to have it make up only a small percentage of a personal portfolio.