Barron's Picks the Top 7 Food Stocks

Barron's says the time may be ripe for food stocks, given their low valuations and strong upside potential. While some investors fret sharply higher commodity prices, food producers have thus-far successfully passed on rising costs to the consumer. With the exclusion of richly-valued Hershey (HSY) and Wrigley (WWY), food stocks trade at about 15x 2008 earnings, substantially cheaper than their 17-19 average ratio of recent years.

While not likely to be the most exciting of stocks, food companies should reward investors with steady growth and secure dividends. In order of appeal, here are the food producers Barron's likes best:

1. Nestle (NSRGY.PK) -- #1 food company in the world, Nestle boasts strong organic growth, a low P/E ratio and valuable non-food assets. Barron's says Nestle may be the "strongest and most balanced" food company in the world, yet its shares trade at under 14x earnings net of some non-food holdings. Shares ($107) could hit $140.
2. Kellogg (K) -- #1 best managed U.S. food company, its shares trade at just 16x 2008 profits. One analyst cites Kellogg's "superior operating fundamentals, superior innovation capability, broad-based market-share growth and substantial financial flexibility," and says shares ($49) could hit $60 over the next year.
3. General Mills (GIS) -- pays a 2.8% dividend, and has been active in share repurchases. With a 16x 2008 P/E ratio, shares ($54) look headed back to the low $60s.
4. Heinz (HNZ) -- with Nelson Peltz now on its board, the company boosted its dividend and share buybacks, cut costs and increased marketing. Shares ($42) could top $50, and the company may become a takeover target.
5. Kraft (KFT) -- at 15x 2008 earnings and a yield of 3.7%, the company is poised for a turnaround.
6. ConAgra (CAG) -- shares trade at a depressed 13x 2008 profits. Earnings are getting a boost from a strong commodity-trading unit. Shares ($21) could hit the high $20s by year-end.
7. Campbell Soup (CPB) -- despite modest domestic growth, shares ($31) may have bottomed at 15x 2008 earnings.