Taking Stock: Despite down economy, reader should buy shares in TreeHouse Foods

Dear Mr. Berko: 
I work for TreeHouse Foods, a big company nobody has ever heard of. I’m 30, still have my job and no debts. But so many people are losing their jobs, the economy gets worse, banks cheat depositors, politicians are crooked and the government can’t do anything right. Now I have two questions:  (1) Is the economy going to hell in a handbasket? And (2) If not, I have $3,000 saved. Should I buy 70 shares of TreeHouse because business keeps getting better. Don’t use my name. I don’t want my co-workers to know my business.
No Name: Aurora, Ill.
Dear NN:
“If America’s economic landscape seems suddenly alien and hostile to many citizens, there is good reason: they have never seen anything like it. Nothing in memory has prepared consumers for such turbulent, epochal change, the sort of upheaval that happens once in 50 years. That may explain why so many voter polls, taken as the economy shudders toward the November election, reveal such ragged emotional edges, so much fear and misgiving. Even the economists do not have a name for the present condition, though one has described it as suspended animation and never-never land.

“In a normal rebound, Americans would be witnessing a flurry of hiring, new investment and lending, and buoyant growth. But the U.S. economy remains almost comatose a full year and a half after the recession ended. Unemployment is still high, real wages are declining. The current slump already ranks as the longest period of sustained weakness since the Great Depression.

“The structural faults ... represent once-in-a-lifetime dislocations that will take years to work out. Among them, the job drought, the debt handover, the savings and loan collapse, the real estate depression, the health care explosion and the runaway federal deficit.”

This is an excerpt from the Sept. 26, 1992 issue of Time magazine when the Dow was trading at 3,300. No, the economy isn’t “going to hell in a handbasket,” but it looks that way. Yes, the “government is doing so many things wrong,” but the government always does so many things wrong. Yes, our politicians are sleazy crooks, but they’ve always been sleazy crooks. And yes, the banks treat us like fools, but the banks have always treated us like fools. So what’s new? The economy stinks and it may get stinkier. Then it will get better, but it doesn’t mean the good times will come back.

Other than the 3,100 employees at TreeHouse (THS-$44.22), I doubt there are 1,000 civilians who know the THS name. So “yes,” buy 70 shares. And I doubt that there are 100 readers who know that THS – a $1.8-billion food manufacturer – is the largest producer of private label pickles, private-label soups and non-dairy powdered creamer in the United States. THS also sells stuff under the Farman, Peter Piper, Steinfield, Bennett, Nature’s Goodness, Habitant, Second Nature, Mocha Mix and E.D. Smith brand names. THS has 35 million shares outstanding, superb 6 percent profit margins, a $30 book value, and should earn $2.70 this year and $3.05 in 2011. Revenue growth is impressive as private label volumes continue to grow faster than brand names and should continue to do so. THS is a dandy company and Fidelity, Vanguard, Oppenheimer, BlackRock plus FMR are also shareholders. Too bad THS doesn’t pay a dividend.

Please address your financial questions to Malcolm Berko, P.O. Box 8303, Largo, FL 33775 or e-mail him at mjberko@yahoo.com. Visit Creators Syndicate Web site at www.creators.com.
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