For Immediate Release

Chicago, IL – November 6, 2009 – Zacks.com releases the latest Zacks Industry Rank. Stocks featured in this week’s analysis include B.P. Prudhoe Bay (BPT), Sabine Royalty Trust (SBR), Archer Daniels Midland (ADM), Hershey (HSY) and Del Monte (DLM).

Zacks Industry Rank Analysis is written by Dirk Van Dijk, CFA, Chief Equity Strategist for Zacks.com.
 
This week: Out-of-Step Industries

Sometimes the best investments come from a small group that seems to be bucking the trend of the much larger group that they are a part of. That appears to be the case for the Oil Royalty Trust group. There are eight names in this group, all of which sport Zacks #2 rankings. That puts them in a tie for 4th place among all industries tracked. Meanwhile, the Energy sector is well down the list overall sector rank list.

With royalty trusts, you get high dividends that will vary with the price of oil or natural gas. They don’t do a lot of reinvestment, just pump the oil or gas out of the ground, sell it and pass the proceeds along to the owners. Of course, eventually the wells run dry and with them, so does the stream of income. But they are a very direct play on the price of oil and gas, and you avoid the risk of dry holes.

They are among the best income-generating investments out there, though some of that income is really a return of principal as the wells run dry. Then again, the tax code recognizes that as well.

A few of the names in the group include B.P. Prudhoe Bay (BPT) and Sabine Royalty Trust (SBR), which might be good bets for people looking for high current income and who think that oil prices are likely to head higher as the dollar gets weaker.

At the other end of the spectrum, food stocks are generally very well regarded right now by the Zacks Rank, a big part of the reason that the Consumer Staples sector trails only the very small and analytically incoherent Conglomerates sector. However, there is one glaring exception to this otherwise tasty group, the Meat Processors. With an average rank of 3.67, the industry ranks 199 out of 206 industries tracked. Investors would be well served by looking elsewhere in the food industry right now. Some of the higher ranked alternatives in the food area would include Archer Daniels Midland (ADM), Hershey (HSY) and Del Monte (DLM).
 
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"I'm often drawn to companies that fly 'under the radar' or are misunderstood by investors, such as Del Monte Foods (NYSE: DLM)," says Chuck Carlson.

In his The DRIP Investor, "The stock represents one of the more attractive low-priced plays among stocks offering dividend reinvestment plans."

"Most people recognize the Del Monte name and the company’s brands in the fruit and vegetable business. But did you know that Del Monte is also home to some of the most popular pet-food brands in the marketplace? 

"Profits have been solid in recent quarters, and growth should continue in 2010. An improving financial position and a rising dividend round out the appeal.

"In the consumer market, Del Monte carries the Del Monte, S&W, Contadina, and College Inn brands. Del Monte is either No. 1 or 2 in food/mass market share in fruit, vegetables, tomato, and broth.

"Pet-food brands include Meow Mix, Kibbles 'n Bits, 9Lives, Milk-Bone, Pup-Peroni, Snausages, and Pounce. Its assortment of leading brand names has provided solid earnings growth of late.

"Del Monte has easily beaten analysts’ earnings estimates in the last three quarters. Per-share profits should be up at least 8% in fi cal 2010 ending in April. Per-share profits should rise at least 10% in fiscal 2011. 

"Reflecting its improved earnings outlook, the firm recently boosted its dividend 25%. The new quarterly rate is $0.05 per share, giving these shares an indicated dividend yield of 2.0%.

"Supporting the dividend should be steady earnings growth as well as further improvement in the firm’s financial position. While the company does carry a fairly high long-term debt load at 49% of total capital, Del Monte has reduced its long-term debt load more than $400 million since 2007. 

"Del Monte is trading just off its 52-week high of $10.78 per share. These shares are not without risks. The debt load is a concern, especially if the market returns to the credit-crunch days of 2008.

"And consumer demand will likely remain stressed as a result of a poor employment environment. Still, the stock traded for nearly $13 per share in 2007, and I expect a retest of that level over the next 12-18 months.

"The stock has performed well this year, and further price gains are expected. The stock represents one of the more attractive low-priced plays in the DRIP world and should be considered by more aggressive investors. 

"Enhancing appeal is the company’s direct-purchase plan, which makes it easy for any investor to buy shares directly, the first share and every share. Minimum initial investment is $200."