septiembre 14, 2004

Don't believe the hype

When I was young -- that is, younger than I am now, or 13ish -- I started getting into investing. I was investing the money I made mowing lawns, so it was paltry amounts.

One of the first things I learned was: don't believe the hype.

I saw this report today on Campbell's Soup:
Food conglomerate Campbell Soup Co. posted a 20 percent drop in fourth-quarter profits as the company began its latest restructuring effort. (emphasis mine)
Campbell's Soup was named Board of the Year by BusinessWeek in December 1996. Many of the business magazines at the time wrote glowing articles about the company and its management.

Don't believe the hype.

Around this time, Campbell's Soup board spun off Vlasic Pickles and some of their other poorly performing brands. Vlasic soon went into a very expensive bankruptcy, sold off its brands, paid lawyers, and then had a couple cents left over for shareholders (my memory is vague on the point).

In April 1998, Campbell's analyst consensus projections for fiscal year 98 sales were about $8 billion, with earnings at about 950 million, or $2.10 a share. The stock was selling in the mid 50s. These were enthusiastic numbers (the 97 numbers were $1.67 EPS), but they were the consensus.

The EPS has since stagnated and been restated a few times. The stock now sells at $25.