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Kraft Still Comforts, Satisfies

NEW YORK ( TheStreet) -- Slowing growth may be the expectation for mature companies, especially those with a footprint worldwide. But whenever that growth comes to crawl, frustrated investors apply a sort of "psychological defense," often reminding themselves that "slow-and-steady" wins the race. That has not been the case with Kraft Foods (KRFT - Get Report), which has maintained a strong reputation for execution.

It's not that the company has operated flawlessly this year. Since Kraft split off its snack food business from Mondelez (MDLZ - Get Report) (worth some $35 billion), the remaining portions have struggled with both organic growth and margins.

Given Kraft's history, that the company has not enjoyed the benefit of the doubt of a ConAgra Foods (CAG), which is not as efficiently operated, is a little surprising given that Kraft outperforms ConAgra in both operating margin and gross margin. With the stock still trading below its fair-market value of $60, smart investors would do well to nibble on Kraft here at $53 a share.

As with General Mills (GIS) and, to a lesser extent, Nestle (NSRGY), Kraft's lack of organic growth has frequently been cited in bearish arguments. It's true organic growth, which measures a company's operational performance using only internal resources and excluding acquisitions, has been a relative disappointment.

[Read: Kellogg's Stuck in a Box]

I also believe the Street has exaggerated Kraft's 4% decline in organic revenue in the third quarter. On a year-over-year comparison, revenue was indeed horrific. But the recent struggles, which were sufficiently explained by the company's management, underscored the adverse impact that the Mondelez spinoff had on the third quarter.

Here's another example of how the Street sometimes conveniently ignores whatever it wants. ConAgra, which completed its deal for Ralcorp earlier this year, enjoys a higher valuation multiple, but has yet to fully synergize the deal and lacks Kraft's operational efficiency.

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