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Peek in Your Refrigerator Is Recipe for Portfolio

"Sometimes you hear of people shifting toward generic or store brands," Schlesinger says. "But for the most part, people are pretty picky about the brands of food and other products that they buy on a recurring basis. They tend to come back to the brand names as soon as they can. People can be very, very brand loyal, especially when you have kids who like the Kraft Mac & Cheese more than the store brand."

That company made headlines last week when it announced it would split into two companies. One half will focus on grocery items; the other will market cookies, snacks and the like to overseas markets.

Thomas Cameron is chairman of Ridgeland, SC based Dividend Growth Advisors. Its philosophy is to invest only in stocks that have increased their dividend every year for at least 10 years, by a minimum average of 10% a year. If anybody cuts the dividend, it is an immediate sell.

Such screening, Cameron says, has steered him away from bank and financial stocks. His focus now is health care companies and energy stocks. Food companies also make the cut, even if not all consumer staples are worth it.

"There are several companies in the field that we used to own, like Procter & Gamble (PG - Get Report), that we don't own anymore because our view of the earnings were changed by the thought that most of their products are of the high end of the areas they serve," Cameron says. "With a lot of people being in more difficult circumstances, they are buying more unbranded names. That doesn't mean to say we are not interested in it, but their rate of earnings gain has gone down a lot."

Nevertheless, many food companies benefit from their global potential, he says. With drought conditions and food production failing to keep pace with growing populations, America's food companies have growing market potential in both emerging and developed countries.

Cameron points to water shortages in China -- which averages about half the per capita water supply here in the U.S. -- that have been exacerbated by efforts to shift its population to coastal areas, as dictated by the logistics of manufacturing and transportation. This ensures that they will be a buyer of imported food.

"In terms of food, in the different economies and nations that grow stuff, about 70% of the water is used for agriculture," Cameron says. "So if you are way out of water, you are going to start buying more stuff from places like the United States or in Brazil."
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