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Dear Mr. Berko: I鈥檓 looking at 400 shares of Unilever and 1,000 shares of Sara Lee and would like to put $10,000 in each issue for a two- to three-year hold. Please tell me what you think of each of these companies. I know you haven鈥檛 liked Sara Lee since 1998 and I wonder if your opinion has changed.

H.T.
Ft. Walton Beach, Fla.

Dear H.T.: Most folks don鈥檛 know that in the past year Unilever (UL-$24) sold nearly $60 billion worth of Hellman鈥檚, Lipton, Slim-Fast, Knorr, Pond鈥檚, Lifebuoy, Dove, Lux, Vaseline, Wishbone as well as several hundred other nutritional, home care, personal care and health, hygiene and beauty products in more than 100 countries. Revenues in 2009 will be weakened by meek global demand and are expected to fall to $57.5 billion from $59.8 billion in 2008. Earnings have been truncated as shoppers traded down from Unilever鈥檚 top lines to less expensive products. So, 2009 earnings may come in at $1.90 a share, down from last year鈥檚 $2.54.

I like Unilever, and I wish I could give you a hearty recommendation, but the shares have been treading water for the past decade even though the firm continues to have the highest net-profit margins (10.3 percent) in the industry. Not even Kellogg, Heinz, Sara Lee, ConAgra, General Mills or Kraft can hold a candle to Unilever鈥檚 margins. In addition, Unilever鈥檚 $1.16 dividend yields a meaty 5.1 percent and none of the previous food giants can match that.

While I can鈥檛 give you a hearty approval, I can give you a modest 鈥渂uy鈥� recommendation because new CEO Paul P. Polman strongly believes he can gain market share in major categories with aggressive brand development. In fact, Polman believes that new growth can be achieved without affecting Unilever鈥檚 fantastic net-profit margins. He insists that new cost controls and new efficiencies coupled with new product development and new brand support will begin to produce new annual earnings advances of 13 percent to 17 percent in the next three to five years. I鈥檓 willing to give him a chance because of the solid dividend. But scale back your intended purchase from 400 shares to 200.

Sara Lee Corp. (SLE-$9.98) includes Jimmy Dean, Hillshire Farms, Ball Park and dozens of other popular brands. This stock has been rolling downhill since 1998. Revenues have crashed, earnings have crashed, dividends have crashed and the stock has contributed to portfolio failure for more than 10 years. The reason is simple: Brenda C. Barnes, Sara Lee鈥檚 CEO. This chick should be running a homeless shelter and not a multibillion-dollar, branded consumer products business.

Barnes has a nasty habit of making big promises and then making excuses for failing to deliver. This has strained Sara Lee鈥檚 credibility with Wall Street. Brenda has a lot of weak people working with her on the executive floor, and she doesn鈥檛 have the guts or smarts to kick them into shape or kick them out. And Brenda is certainly no asset to Sara Lee either 鈥� proof of the pudding is the company鈥檚 record of revenues and earnings. Unfortunately for shareholders, Sara Lee鈥檚 daft board of directors doesn鈥檛 have a clue about what is going on. But these executives do get enormous perks and bucks for going to meetings. Barnes must have some revealing photos of her board members because I can鈥檛 think of a single reason why she still has her job.

I think Sara Lee has a bountiful basket of swell products, but I can鈥檛 give you a hearty approval. I can give you a modest 鈥渂uy鈥� recommendation because the 42-cent dividend yields 4.8 percent, the stock trades just above its all-time low of $8, and revenues, earnings and the dividend are expected to improve in 2010. I also think the stock could trade in the $10 to $12 range in early 2010. But be cautious and reduce your purchase from 1,000 shares to 500.

Address your financial questions to Malcolm Berko, c/o The Daily Journal of Commerce, P.O. Box 1416, Boca Raton, FL 33429, or e-mail him at [email protected].
漏 Creators Syndicate Inc.