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Peek in Your Refrigerator Is Recipe for Portfolio

Schlesinger admits that even with international expansion potential, there are potential drawbacks for food stocks. Chief among them is rising agricultural commodity costs. Another concern is currency fluctuations.

"The rising commodity input cost is definitely a factor," he says. "Sugar has been particularly all over the place during the past year or so. It has gone through some wild swings. We are seeing that with corn as an input to many products as well."

The price is expected to increase nearly 10% because of the demand for ethanol and livestock feed, he says, and "long term, it is something that concerns us and we have to keep our eye on."

Schlesinger cautions against putting all your eggs in one basket. Food-related stocks should be part of a diversified portfolio, he says.

"But, that being said, for an investor that is concerned with a relative degree of safety for the underlying business, we think it could be a meaningful component to many portfolios, for individual investors in particular," Schlesinger says. "Consumer staples have traditionally been considered among the most defensive ... One point to keep in mind is that these stocks may underperform in an up cycle, where more aggressive growth companies tend to outperform. But hopefully with the added dividend and the stability of the business they potentially give you some additional downside protection when markets are more volatile."

For those looking for more than just individual companies to populate their portfolio or retirement plan, a variety of ETFs and ETNs have a food focus.

Among them are the BS E-Tracs CMCI Food Total Return ETN (FUD); the Market Vectors Agribusiness ETF (MOO), which looks at global agriculture companies; Global X Food ETF (EATX) and PowerShares Dynamic Food & Beverage (PBJ), which tracks U.S. food and beverage companies, among them Pepsi, McDonald's, Starbucks (SBUX - Get Report), Mead Johnson Nutrition (MJN - Get Report) and YUM! Brands (YUM - Get Report).

-- Written by Joe Mont in Boston.



>To contact the writer of this article, click here: Joe Mont.

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