Campbell Soup Company (CPB)

Takeover target? If this rumour had juice to it, this stock would be up higher, but an interesting idea. If there is one sector investors are complacent on, it is consumer staples. In these companies, investors are hiding in the balance sheet looking to milk the dividends because they can’t find any yield in bonds. The fact that those big stocks have low volatility and the ability to grow their dividend, is very attractive. He would avoid this stock.

In the consumer staple sector. There is a reduction in barriers to entry within packaged foods. He would rather be in flavouring companies, such as Fruteron (?).

He is going to steer clear of this. Had a great run close to 24 months, and has moved back as people have been rethinking the strength of brand generally. People are looking what Amazon (AMZN-Q) is doing with Whole Foods and wondering about implications for the traditional branded products, as well as about healthiness. This still has a very pricey valuation.

*Short*. This trades at an expensive valuation at roughly 21X earnings. It is dependent primarily on soup, which is in secular decline, and is the high margin part of their business. A lot of it is dependent on weather. Dividend yield of 2.05%.

There are 2 key themes in the market. One is people who are betting on low interest rates, low inflation and low growth. In that camp, people are saying they’ll buy a dividend as opposed to a fixed income at record low yields. This is not an exciting company, but a pretty defensible one. People are buying this because it pays a 2% dividend that will slowly grow over time. It is not economically sensitive. If you believe we are in a low growth environment for a long time, these consumer staples, utilities and telcos could trade at significantly higher multiples.

This has been on fire, up over 40% in the last year. When looking at the sector as a whole, the names that have a large percentage of the revenue coming from North America has really been focused on increasing their awareness and product line-up in terms of healthier foods. This company has done that well. Made some acquisitions and are focusing more on the organic side of things. 75% of their revenues come from the US. He wouldn’t be opposed to buying this, but because of the run it has had you might consider buying a half position and adding more on weakness.

Kraft/Heinz deal: It put all of these companies into play in people’s minds. But he does not see a lot of value in these names.

Very good brand and very stable earnings. Had some choppy rides lately but have some internal issues going on at the board level. Likes the stock and thinks it will do fine.

Statistics show that consumption is on a down trend. Their core products are in some global deterioration right now. Doesn’t know that he would put a lot of money into the consumer side right now.

Consumer staples have been consolidating during the last 3 to 4 months. Big retailers are squeezing staples companies on margins. There are investors rotating into more economically sensitive companies. Thinks the consolidation may be done. You buy this for safety.