Six Consumer Staples Stocks to Nibble On


For more coverage from Ratings team, check out Ratings section.

With Monday's 413-point rally in the Dow Jones Industrial Average, the index closed 17.5% above the sub-7900 level it hit on Friday, Oct. 10. Even the London-Interbank Offered Rate, or Libor, has dropped almost a full percentage point to 3.83% from 4.82% over the same 10-day period.

Just because panic appears to be subsiding does not mean the economy misses the rough patch. It just suggests that central banks around the world are providing an environment where businesses will be able to continue to operate based on their own fundamentals.

As investors regain their appetite to nibble on U.S. stocks under the recessionary cloud of a potential decline in third-quarter gross domestic product, here are six stocks in the food and beverage sector that Ratings stock model awards A- or better buy ratings.

First, at A+, General Mills is the best-rated company of the bunch. Not only does the stock pay a nice dividend yield of about 2.6% but the company continues to achieve higher levels of revenue and earnings by expanding beyond the mature U.S. market to fast-growing markets in Asia, Europe and Latin America.

Second, Ralcorp Holdings is rated A. Fellow analyst Jake Lynch made the case for Ralcorp, suggesting that as family budgets shrink, the company's Post cereal brand may be able to increase sales and grab market share.


To give yourself a break from worrying about the economy and earnings season, consider two stocks, both rated A-, that are perfect for football season. Snack on some nuts from Diamond Foods and wash them down with a refreshing Anheuser-Busch beer.


Diamond Foods has low debt and positively trending sales and earnings. For Budweiser, its deal to merge with InBev NV for $70 cash per share by year-end appears to still be on track. That's about 10% above BUD shares' current price.

Another premiere food products company, Kellogg offers a dividend yield of 2.7% and a long history of higher-trending revenue and earnings. The company will report third-quarter earnings on Oct. 29, with an average analyst earnings expectation of 81 cents a share, or about 6% above the third quarter of 2007.

Lastly, the lesser-known Cal-Maine Foods , rated A-, pays a dividend yield of 2.3% from its business of selling fresh eggs. The shares qualify as undiscovered. Aside from Ratings, there is only one other firm, as listed by Bloomberg, that follows Cal-Maine. Plus, the shares are trading at a cheap multiple to earning of just 4.4. That is a massive discount to the market P/E of 19.0 for the S&P 500.

Show Comments

Back to Top