Campbell's is in the soup

[True Federalist (진정한 연방 주의자)]

Now that tax season is done, I'm in the midst of adjusting my stock portfolio. (I do individual stocks for mid-to-large cap stocks, and mutual funds for small cap stocks and bonds, as I have enuf to be able to diversify stock risk on my own, but I don't put a large enuf share into bonds into be able to do that and it's just not worth the time it would take me to research small caps to buy them individually.)

Campbell's (CPB) had attracted my attention as a possible purchase.  After all, Campbell's soups will still be around a century from now, so it's a good solid business, but the shrinking market for prepared foods does mean that you do need a business plan that can condense things appropriately.  It has a nice dividend and the earnings and cash flow to pay it, but since the business is shrinking, the question is, can the company adapt so that I'm not likely to end up with the lovely dividend I get being offset by a capital loss when I sell the stock five to twenty years from now.  (To the despair of my stockbroker, I'm not by any stretch of the imagination what one would consider a day trader.) It had made the list of a hundred-odd stocks that passed my initial screens and I settled down this weekend to look more deeply into them and decide what to buy (I purged some poor performers a couple weeks ago to free up cash and see what I would have available to buy with.)

Anyway, if you follow stocks far more closely than I do, you will have already heard that the CEO made a surprise resignation Friday with lower earnings guidance as well.  I'm definitely glad I didn't buy last week but I do think the stock oversold on Friday (down more than 12%). Other than the CEO's departure, there wasn't anything surprising in Friday's report, just disappointing. The stock already had a hefty discount for its declining earnings (and the earnings reported were actually above analyst expectations).  So what's going on is a company that's firmly facing reality by having more realistic earning expectations and it clearly will be doing something to address that problem on a quicker timetable.  Whether it will be the right thing remains to be seen, but I'm cautiously optimistic now, tho I still need to complete my due diligence.  I tend to be conservative, so I'll likely wait and see who they get as their new CEO before deciding whether to buy it.  The dividend is likely safe for the rest of this year, but I see little short-term upside in the stock price, so I don't think I need to buy immediately to partake of the long-term recovery.  Hence I've got time to decide whether Campbell's recovery will be flavorful enuf to put in my investment stock pot, or if I should just let it simmer on its own.

[Ban my account ffs!]

“Condense things properly”...campbells soup... oh ernest, you are just too much. 

I’d stick my foot in the water with a moderate purchase.  You know the near and midterm future is stability and planned shrinkage.  They haven’t bungled things up so far and we will always need thay cream of mushroom.

[Torie]

I ceased purchasing Campbell's Soup about 15 years ago, and Dan and I eat a lot of soup. Progresso is better, and Amy's is the best. Their packaging is also frumpy. What appears as images on the cans of their competitors looks much more dilatable. Such packaging really matters methinks.

[DC Al Fine]

Do you really think there's a strong case (other than whatever the fun of it justifies) for buying and selling individual stocks?

Ding ding ding we have a winner.

Ernest, why don't you just buy index funds and avoid all the work and likely lower returns of stock picking?

[True Federalist (진정한 연방 주의자)]

Do you really think there's a strong case (other than whatever the fun of it justifies) for buying and selling individual stocks?

Ding ding ding we have a winner.

Ernest, why don't you just buy index funds and avoid all the work and likely lower returns of stock picking?

Index funds are good if you don't have enough time and/or funds to intelligently diversify your portfolio. If I were just starting out, then mutual funds would definitely be the place to be, but I'm not there. I do have the money to diversify my stocks and I have the time to be able to screen them so that over time I do modestly better than a pure index fund.  Also, by buying individual stocks instead of a mutual fund, I've got ready access to the cash flow if I need to do something other with it than reinvest it, and I don't have continuing expenses the way I would if I were in a mutual fund.

Also as I pointed out, when it comes to small-caps and bonds, I don't have the time to do the picking (nor sufficient funds that I want to invest in bonds to diversify a bond portfolio on mine own), so in those sectors I do use funds. I will admit to getting some entertainment form this form of hunting, but it does put meat on my table.

[WritOfCertiorari]

Even as a fan of mutual funds (well, ETFs, actually, but same deal), if someone is dedicated enough to do research on stocks, and actually knows what they are doing, its actually very possible to outperform the market, especially after fees. Some brokers are even offering commission-free stock trading. Remember that a mutual fund likely is just tracking the S&P... that's hardly an impossible goal to beat.

I don't know enough about the details of Campbell's balance sheet or future outlook, but I would implore you not to buy a stock just for a dividend. It can be one of the first things to be reduced in tough times.

[True Federalist (진정한 연방 주의자)]

I don't know enough about the details of Campbell's balance sheet or future outlook, but I would implore you not to buy a stock just for a dividend. It can be one of the first things to be reduced in tough times.

The dividend looks to be safe for now.  Campbell's has more than adequate free cash flow and earnings to pay it plus the Dorrance family that owns some 40% of the stock wants dividends paid to them.  The primary risk in owning Campbell's in the next few years should be what happens with the stock price, not its dividend. 

[Torie]

Almost all of my liquid assets are in mutual funds, the bulk being in Vanguard index funds. It has been that way for decades. I started looking for index funds for my Dad before they even existed, after learning about modern portfolio theory at the University of Chicago Business School. When Vanguard set up its first mutual fund in 1976 or so, I was right there to invest for my Dad, and soon after myself with a few bucks. And then I got deflected by real estate, and most of my money went there, until about the late 1980's, when I started to invest elsewhere again. Now my life is quite complicated financially, and it takes quite a bit of time sad to say.

[DC Al Fine]

Almost all of my liquid assets are in mutual funds, the bulk being in Vanguard index funds. It has been that way for decades. I started looking for index funds for my Dad before they even existed, after learning about modern portfolio theory at the University of Chicago Business School. When Vanguard set up its first mutual fund in 1976 or so, I was right there to invest for my Dad, and soon after myself with a few bucks. And then I got deflected by real estate, and most of my money went there, until about the late 1980's, when I started to invest elsewhere again. Now my life is quite complicated financially, and it takes quite a bit of time sad to say.

That's cool. How did you even hear about Vanguard back then? They certainly wouldn't have had a financial advisor network.

[FEMA Camp Administrator]

As someone interested in not being poor my entire life, how would the Atlas trading community advise I go about entering this world of "investing"?

[DC Al Fine]

As someone interested in not being poor my entire life, how would the Atlas trading community advise I go about entering this world of "investing"?

I would definitely recommend index funds. That is, instead of picking stocks like Apple or Ford, you buy the entire market. This allows you to avoid the work of picking stocks and the issues associated with picking bad ones. The biggest community for indexing is Bogleheads which Torie used to be quite involved in.

https://www.bogleheads.org/wiki/Bogleheads®_investing_start-up_kit

[BundouYMB]

As someone interested in not being poor my entire life, how would the Atlas trading community advise I go about entering this world of "investing"?

I agree strongly about index funds, but even before investing in normal index funds I would set up a Roth IRA if you don't have one. A Roth IRA is a retirement account that taxes your money on the way in and not on the way out. This means all your earnings are essentially tax free, as long as you don't break any rules (wait until you're retirement age to access the money.)

The money in your Roth IRA can be invested in almost anything, but I would simply set up a Roth IRA that's invested in an index fund. Because of the tax benefits I would max out contributions to your Roth IRA before putting even a penny toward other investments (I believe the limit is $15,000 a year.)

[WritOfCertiorari]

IRAs are more like $5500 a year. The $15000 is for 401(k)s.

Also, the Roth v. Traditional decision is more about what your current income is, and how you plan to live in retirement. Just remember you can roll a traditional into a Roth if the need arises.

[True Federalist (진정한 연방 주의자)]

Yeah, if you are just starting out, index funds are the way to go, and start with an IRA, especially if you are getting health insurance thru the Marketplace. (A traditional IRA lowers your AGI so that you qualify for a higher premium tax credits. )  Even if you can't afford the full $5,500, try to do at least $2,000 a year if you are aren't a dependent on someone else's tax return.  While the Retirement Savings Credit that is available to lower income taxpayers on the first $2,000 of retirement contributions isn't a refundable credit, anyone who can qualify for it should definitely take advantage of it as even without the Marketplace, it can mean that out of that first $2,000, the government is paying up to $1,200. (Up to $1,000 in credit, $200 in less tax (if you do a traditional IRA).) That's before considering the effect on State income tax and the Marketplace premium tax credits.

(Note, if you aren't in the Marketplace, you're probably better off going with a Roth IRA than a traditional IRA if you are at an income level that qualifies you for the Retirement Savings Credit.)

[Torie]

Almost all of my liquid assets are in mutual funds, the bulk being in Vanguard index funds. It has been that way for decades. I started looking for index funds for my Dad before they even existed, after learning about modern portfolio theory at the University of Chicago Business School. When Vanguard set up its first mutual fund in 1976 or so, I was right there to invest for my Dad, and soon after myself with a few bucks. And then I got deflected by real estate, and most of my money went there, until about the late 1980's, when I started to invest elsewhere again. Now my life is quite complicated financially, and it takes quite a bit of time sad to say.

That's cool. How did you even hear about Vanguard back then? They certainly wouldn't have had a financial advisor network.

I discovered the index fund by accident, but I was on the hunt.  The miraculous story of how Vanguard emerged by an unanticipated chain of events, and the politics that led to the creation of an "in-house" index fund, as part of a "plot" to sever the hold of its advisory company over the mutual fund company (which control still obtains over just about every other mutual fund company out there), became familiar to me later. Jack Bogle is one of my all time heroes. We exchanged correspondence, and now chat at Boglehead's meet-ups each fall in Malvern which I try to attend each year. When I think about how to give my life meaning in a different sphere, I think of Jack Bogle.

Vanguard's emergence is the most magnificently serendipitous accident, since whatever efficacious accidental mutation (like a big brain) led to the creation of the human species.

[Mr.Phips]

Kellogg is my prepackaged food stock and that too has fallen. The price trajectory for that stock has been very similar.to Campbell's.  The dividend is one of the reasons why I keep it, like almost all of my other stocks.