The Prudent Investor

A First Look At All Of The Companies
March 27, 2007, 7:08 am
Filed under: Consumer Goods

Having selected the Processed & Packaged Goods Industry of the Consumer Goods sector, it is time to begin looking at the companies. There are over 50 companies identified by Yahoo Finance to be in this industry, and no, I am not going to look at every one of them. <g>

I will narrow this list by removing those companies for which I can find a compelling reason not to keep. To begin, by removing companies that either do not have adequate information or are not making money, the number is reduced to 34.

The group offers an average P/E of about 29. I am not necessarily against high P/E companies, but they do tend to be rather volatile at times, and that is not the direction of this portfolio. If I allow companies to remain that sport a P/E as high as 25% above the average, then I can remove companies to reduce the list to 23. By the way, this removes the well-known Sara Lee Corp.

If you read how I selected the water utility that sits in the portfolio (or numerous messages around the Internet), then you will know that I am no fan of debt. There are a number of companies that have more debt than equity, so by removing them the count is reduced to 15. There are some notable companies that are dropped at this point – General Mills, Del Monte Foods, Campbell Soup, and the most significant for me, Kellogg. This company has significance in the regard that I currently hold it in my DRiP portfolio.

As I have so many companies from which to choose, I will remove companies that either offer no dividend, or a dividend less than 1%. This reduces the count to 10. Amongst this group id Diamond Foods, which processes, markets, and distributes nuts of all types. I gorged myself with them years ago in the press box at the Emerald Bowl in 2004.

So ten companies is a reasonable number from which to select, but I am going to make one more cut – I am removing companies with a Market Capitalization of less than $1B. I am looking to include a large, solid company, and removing small caps from the list yields the following list:

Company Market Cap
Pepsico, Inc. (PEP) 103.42
Unilever NV (UN) 74.35
ConAgra Foods Inc. (CAG) 12.74
McCormick & Co. Inc. (MKC) 4.98
The J. M. Smucker Company (SJM) 2.81
Corn Products International Inc. (CPO) 2.34
Flowers Foods Inc. (FLO) 1.78

It almost looks like the longer the name, the smaller Market Cap. <g>

In my next post I will begin looking at each company in this list.


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