In a tape that can turn ugly in a heartbeat, if you want to know what a win-win looks like, look at the stocks of General Mills (GIS) and B&G Foods (BGS). Here are two of my favorite stocks for retail investors -- isolated from so much of the nonsense you see on your screen on a day like today, including the dollar -- doing exactly what you want them to do: deals that eliminate old brands for General Mills, making the company more natural and organic, and deals that give B&G Foods old brands to revitalize, which is exactly what will happen.
General Mills will take the $765 million it gets from B&G Foods for Green Giant and Le Sueur and plow it into debt trimming and share buying. B&G will take over a huge piece of aisle space in the supermarket and get rid of whatever isn't working with Green Giant and Le Sueur and milk the remaining part for cash and dividend boosts. B&G's been languishing because it thrives on deals and there haven't been any. General Mills has been holding in as CEO Ken Powell remakes the company as more natural and organic, and one of the best ways for him to do so is to sell this tired old brand. Two birds with one stone.
I think the consolidation in the food business continues because of the imperative of having natural and organic. Campbell Soup (CPB) reported an OK quarter this morning that actually showed real growth in its natural and organic line, and after the stock initially got hit it bounced right back. To me, that shows that even if you are perceived to have overpaid for a natural and organic asset -- in this case, Bolthouse Farms -- it still works. (Campbell Soup is part of TheStreet's Dividend Stock Advisor portfolio.)
That's why I remain convinced that WhiteWave (WWAV) is a necessity to own both for its natural and organic lines, which are doing so well, and for the possibility of a takeout. It is why I think Mondelez (MDLZ) and Kraft (KHC), two other Action Alerts PLUS names to go with WhiteWave, are just splendid here.
The food group's the way to go in a world where we are going to tighten at the same time the world is slowing.
All of them are working and the M&A in the sector will remain robust as long as growth is low and money is cheap.