Jim (cont'd):     

It is hard to find stocks that you can feel comfortable owning in this environment… but plays on cheaper commodities like ConAgra fit the bill… especially when they are consumer staples… this is a recession resistant company after all.. as people do not cut back on food… unless things get a whole lot worse than they are now… plus while ConAgra might not like this characterization… many of their brands are not exactly premium high prices brands… although, I don’t think anyone reports to a higher authority than Hebrew National… that is what the ads say… the raw costs that were putting the squeeze on this company’s earnings during the first half of 2008 are now in retreat… allowing ConAgra to become more profitable… think of it’s biggest input costs… just think of it… think of where this company is… they are all down huge… 11.6% of ConAgra’s costs are in trucking… right, trucking requires diesel fuel… diesel prices have fallen 50% since their 52 week high in May to $2.37... how about potatoes… potatoes are up… I mean they are, that is a huge cost for these guys… and potatoes are, let’s just say, 11.4% of ConAgra’s input cost… potato prices rose 61% in 2008... they are expected to fall 11% at a minimum in 2009... natural gas is up 8.7% of ConAgra’s input cost … it is down more than… 64% from it’s 52 week high in June… wheat is the next biggest input… and wheat prices are currently 33% lower than they were when I put ConAgra in the sell block… soy oil… east meets west… LaChoy makes Chinese food… makes up 4.4% of ConAgra’s input cost… soy bean futures peaked in June, man they are down like 37%… finally 4.1% comes from corn… which peaked in June too, and is now down 48%....

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And while ConAgra is frolicking in lower raw costs… it is also charging you higher prices at the supermarket… back in late March of 2008, ConAgra put in price increases across 95% of its portfolios brands… and, unlike, Cramer fave Pam… they are sticking… the company has made a lot of smart moves lately… it is not just that it locked out with raw costs back in June 23rd… ConAgra closed its sales… boy is this brilliant… of trading and merchandising divisions for $2.2B in cash, and $550 million in payment and in kind debt securities… they used this quarter to use the proceeds to buy back $900 million worth of stock… that was brilliant… paid down $1.1B in commercial paper cleaning up the balance sheet… the guy saw everything coming… ConAgra also started advertising campaigns for its Banquet frozen foods…. and the first television ad ever for Hunt’s… okay, for the ketchup… at least in over a decade… these moves were difficult to divine initially because the raw costs problems… and the trading operations… we should have always assumed that at some point the brands would come to the forefront.. .given CEO Gary Rodkin, excellent food back ground, which includes important times spent with Generous Mills, Tropicana, and as chairman and CEO of Cramer fave Pepsi’s North American division, before he came to ConAgra… and you know what… I like that fact that Wal-Mart, a recession play if there ever were one… as consumers trade down even though the analysts don’t think so… is ConAgra’s biggest customer… 15% of sales… you don’t have to worry Salmonella in their Peter Pan peanut butter since ConAgra hasn’t purchased any ingredients from the peanut corporation of America… the center of the Salmonella outbreak investigation… and oh take it from this once poisoned Gorman… as great as PB&Js are… they aren’t worth Salmonella… better to whip up a grilled cheese sandwich… and don’t forget the Pam.

Now, since June ConAgra has been downgraded by two brokers… none of these guys see this coming… I am going to be so early on this one… two more have initiated coverage at neutral… come on guys, give me a break… expectations have come down… the biggest drag on the company high raw costs are now a thing of the past… ConAgra’s share price has fallen so low… to a healthy choice $17... that it’s yields, it yields 4.5%… it is trading at only 10 times forward earnings… a lower evaluation than even the lowly Sara Lee… and nobody likes Sara Lee… and the dividend is usually covered by the cash flow of this good giant.

Here is the bottom line…

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The Bottom Line!:     It is time to start liking ConAgra (CAG) right now… and that is because the input costs have come down… it’s yield has gone up… it is a recession resistant accidental high yielder… that let’s you snap into the Slim Jim… what more could you like.

Now that input costs have gone down, I’m freeing CAG from the sell block & I think it’s a buy...