TALKING POINT/FOOD STOCKS
Fueled by an earnings-driven bull
market, food stocks are emerging as the big winners, analysts
say.
    "This is an earnings-driven market, and the investor is
homing in on stocks that have visible and predictable earnings
growth," E.F. Hutton food analyst June Page said.
    The food group, whose stocks have underperformed since the
beginning of the year after about five years of growth, seems
to have turned around, DLJ Securities analyst William Leach
agreed.
    The fundamentals remain favorable and may even be enhanced
by the effects of tax reform for companies such as Sara Lee
Corp <SLE>, Quaker Oats Co <OAT>, and General Mills Inc <GIS>,
Page said. These and other food companies are recommended as
aggressive buys on a selective basis by most brokerage houses
surveyed.
    The current economy provides an environment of stable
inflation, interest rates and energy costs, which gives food
companies the flexibility to expand profit margins over a
period of time, Page said. Lower commodity costs allow for
further price flexibility, she added.
    Another plus is that increases in labor and packaging in
the food industry have been minimal, she noted.
    For 1987, Page said E.F. Hutton sees inflation holding
under four pct, oil prices stabilizing at 17 to 18 dlrs a
barrel and interest rates remaining at current levels.
    As a result of new production facilities featuring
sophisticated technology "companies now have a lower breakeven
point because they have enhanced productivity and lower
overhead costs," she said.
    Unit volume growth has accelerated in the past several
years in the food industry due to product segmentation, that
is, iintends to
file for an offering of about two mln shares within the next 30
days.
    It said proceeds would be used for working capital and
other general corporate purposes, including the possible
acquisition of other businesses or additional technology.
    Ashton-Tate now has about 23.6 mln shares outstanding.
 Reuter
