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Tickers in this Article: DLM, SENEA, GIS, HNZ, CAG, CL
In recent years, I've taken to eating more fruit, realizing my diet wasn't going to cut it as I pushed through 40. Two products I can't live without are Del Monte (NYSE:DLM) fruit in a plastic jar and Smucker's (NYSE:SJM) Europe's Best frozen-fruit brand. The former I eat morning, and night; the latter is great for making smoothies. Because I've already recently written about Smucker's, I'll give you five reasons to love Del Monte. IN PICTURES: Eight Ways To Survive A Market Downturn

A Changing Business
Last October, Del Monte closed a deal to sell its StarKist division to a Korean company for $300 million after tax. Its reason for doing so: the company wanted to focus on its higher margin value-added businesses (read: pet food) and the price was right. Just six years earlier in a deal worth $2 billion, it merged with SKF Foods (a division of Heinz), which brought the canned tuna maker into the fold. Delivering an excellent return on investment in such a short period, its management believes it can do better with some of its other brands. I'm sure they'll do just fine with a smaller, more profitable roster of businesses.

Not Just Fruit
As I mentioned above, there's more to Del Monte than fruit; it also has vegetables, pasta sauces, broths, pet snacks and pet food. Some of the parts were in place before the merger, some came with the resulting combination and the most recent pieces of the puzzle joined in the summer of 2006, when it acquired both the Meow Mix and Milk Bone brands. In 2006, pet products accounted for 28.6% of DLM's overall revenues and 46.5% of its operating income. Two years later, those numbers were 38.3% and 70.2%, respectively. There's a lot more money in pet products than tuna fish, you can be sure of that. The most encouraging thing about pet products isn't the profitability, but rather the fact that Del Monte ranks fifth globally in terms of market share, despite intense competition from Mars and Nestle.

Del Monte's Biggest Competitors:

Company
Competitor\'s Product
Del Monte\'s Product
Dole Food Company (Private)
Dole All-Natural Fruit
Del Monte Fruit
Seneca Foods (Nasdaq:SENEA)
Private Label
Del Monte Fruit
General Mills (NYSE:GIS)
Green Giant
Del Monte, S&W
H.J. Heinz (NYSE:HNZ)
Heinz
Contadina
Con Agra (NYSE:CAG)
Hunt\'s
Contadina
Mars (Private)
Whiskas
Meow Mix
Colgate-Palmolive (NYSE:CL)
Hill\'s Pet Nutrition
Kibbles \'n Bits

Upping Marketing Budget

Companies winning in this recession have a common trait, which is the confidence to go faster when everyone else is choosing to go slower. Del Monte is spending $15 million dollars in 2009 to run a TV advertising campaign for its canned fruit products - its first in a decade. That's a 300% increase from its budget in 2008. Emphasizing bang for your buck, it takes a confident bunch to go for it when the conservative play is to save your money. Given that most of the money is being spent in the fall, investors won't know how successful the campaign is until sometime late in the second quarter or early in the third. It can't miss. (For related reading, see 22 Ways To Fight Rising Food Prices.)

Healthy Earnings
Third-quarter revenues rose 8.4% year-over-year from $869 million to $942 million and GAAP EPS from its continuing operations (Starkist no longer in the mix) grew 25% to 30 cents from 24 cents. Broken down by its two reportable segments, consumer product sales increased 3.4% and operating income 15.2%, while pet product revenues grew 15.1% and operating income 15.5%. Pet products generated $8 million more in operating income than consumer products on $76 million less revenue. How did it grow sales 8.4% in the middle of a recession? Price increases accounted for a lion's share of the gain, a testament to the strong demand for its products. Due to its pricing power, operating margins grew 150 basis points in the quarter to 14.2%. Looking ahead to its fourth-quarter earnings announcement June 11, company guidance is positive.

Bottom Line
Last, but not least, is my fifth reason to love Del Monte: its stock is cheap. With all the good news in a terrible economy, you'd think investors would be clamoring to buy. No such luck. Despite appreciating 40% or so since December, its stock trades at a price-to-sales ratio of 0.40 and a price-to-book ratio of 1.00. Frankly, if I had more room, I'd give you another five reasons.

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