Investing Daily

In this market environment, it’s difficult to pinpoint opportunities, but there are several companies that have capitalized on the downturn. And they’re common household names.

Campbell Soup Company (NYSE: CPB) was the sole stock listed on the S&P 500 to close in the black during the market’s steep selloff Sept. 29. The New Jersey-based company has grown into the world’s largest soup maker. Campbell shrugged off one of the worst trading days in more than 20 years, closing at $37.75 per share—a 12-cent or 0.3 percent gain.

Although the S&P 500 has significantly underperformed this year, down about 35 percent year-to-date, Campbell has realized a 5.7 percent gain since January.

What’s enabled the soup company to rise above the fray is that consumers are buckling down, turning to cheaper food such as Campbell’s canned victuals to warm their bellies. Even during the food industry’s challenging environment, sales of its condensed soups climbed by 6 percent, and its ready-to-serve products rose 5 percent.

The company’s beverage sales have also increased this year, soaring by more than 10 percent, partly because of an agreement to have Coca-Cola distribute its V-8 and V-8 V-Fusion juices.

Campbell also has been able to take advantage of the weak dollar overseas. International sales were up by 17 percent, largely because the weak greenback made exports more attractive and sales of its Arnott’s brand biscuits in Australia and the Pacific Rim region have been particularly strong. The company also has a burgeoning broth business in Russia and China, which will be introduced in additional markets later this year.

Another reason investors haven’t canned Campbell Soup yet is because it will pay $1 per share in annual dividends—a 14 percent increase—starting Nov. 3. Buy Campbell Soup below 40.

Financial crisis or not, we all need to eat. And the packaged food industry is one place you’ll find solid balance sheets and consistent operating performance, even in uncertain economic environments.

Kraft Foods (NYSE: KFT) is one of the world’s leading food and beverage companies with such well-known and established brands as Philadelphia Cream Cheese, Oscar Mayer, Post cereals, Nabisco and, of course, Kraft—which is most famous for its macaroni and cheese.

Besides offering new on-the-go products, such as Lunchables Wrapz and Stove Top Quick Cups, Kraft also has new management at the top.Irene Rosenfeld was appointed CEO in June 2006 and also became chairman in March 2007 following Altria Group’s spinoff of Kraft.

Rosenfeld brings to the table 25 years of industry experience. She returned to Kraft from Pepsico’s Frito-Lay division, where she was Chairman and CEO since 2004.

Kraft’s broad portfolio of iconic brands—with a presence in more than 150 countries—generated cash flow from operations of $3.6 billion last year and free cash flow of $2.3 billion after capital expenditures. Revenues totaled more than $37 billion in 2007, and the company expects revenues to grow more than 4 percent by the end of 2008.

What’s more, insiders purchased stock in February, and Warren Buffett’s Berkshire Hathaway owns 132.4 million shares, or 8.6 percent of the outstanding shares.

However, most Street analysts have low expectations for the stock. Only four out of 18 analysts following the stock have recommended it as a buy.

But this is a good thing. Because expectations are set so low, Kraft is positioned to surprise on the upside if management continues to execute its strategy and move the company in the right direction. And so far, it has.

With rising prices on the horizon, most consumers feeling the economic pinch are more apt to cook at home, which will certainly benefit Kraft. Yielding 4 percent, Kraft Foods is a buy up to 32.

Johnson & Johnson (NYSE: JNJ) is one of the largest providers of healthcare products in the consumer, pharmaceutical and medical devices market. The company’s diversity is what makes it such an attractive holding.

Whether it’s analgesics or baby care, endoscopic surgery or interventional cardiology, oral care or wound care, Johnson & Johnson creates products that help people live healthier lives.

Take, for example, Johnson & Johnson’s ever-evolving Band-Aid brand adhesive bandages and related first-aid products. Today’s Band-Aids are a far cry from the first adhesive bandages introduced in 1920.

And surface-wound treatment bandages aren’t the only focus of Johnson & Johnson’s Band-Aid brand; the company also produces Burn-Aid, a gel that’s applied to burns as a prepackaged dressing, which rapidly cools to prevent further tissue damage and accelerate the healing process.

Not surprising, Johnson & Johnson’s diverse revenue stream consists of market-leading products not only in the consumer universe but also from its pharmaceutical and medical device business segments.

Earlier this year, subsidiary Veridex accomplished a major feat. Its GeneSearch Breast Lymph Node Assay became the first FDA-approved, gene-based lymph node test used to detect breast cancer. The test is currently available for use in several institutions around the country and is expected to gain wider use over the next few years.   

Johnson & Johnson’s diversity as a health care products provider has certainly paid off. It reported third quarter profits totaling $3.31 billion, or $1.17 a share, up from $2.55 billion, or 88 cents, from year-ago levels. Domestic sales increased 11.2 percent for the quarter, while international sales climbed an additional 14.7 percent. With incremental earnings growth expected through 2008 from improving margins and share buybacks, Johnson & Johnson rates a buy up to 70.

Kate Zanoni is deputy managing editor of Personal Finance.