The Sweet Taste of Nestle's - Barron's

“People have to eat, regardless of what’s happening on Main Street or Wall Street.” - Barron’s says people are likely to keep on eating global food conglomerate Nestle’s (NSRGY.PK) top brand-name foods despite a softening economy. Nestle might face expensive commodities, global competition, and consolidation (Mars purchased Wrigley’s gum last week). But its consistent top-line growth, bottom-line margins and efficient use of capital have made and kept Nestle number-one. All of Nestle’s product lines are growing, as is its income. And CEO Paul Bulcke continues to improve products by making them more nutritional, a boon for an increasingly health-conscious population.

Nestle also wants to develop more high-end brands. It sees the developing world as accounting for 50% of profits someday soon. Nestle recently sold off its non-core 77% stake in eye-care company Alcon for $39 billion; that cash should help Nestle continue share buybacks, paying down debt, and protect its 2.5% dividend yield. It might also facilitate a candy or nutritional foods acquisition play. Other U.S. food companies may have lower P/E’s, but Nestle’s growth is steadier. Shares should be 20% higher.

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Seeking Alpha’s Rick Shea says Nestle is an anti-recession play not only because people have to eat, but also because Nestle already has so much of its business overseas, positioning the company better than those U.S. food conglomerates hankering to diversify overseas now. Management is widely respected, and a diverse product base means not all commodities will bite into Nestle’s bottom line.