Kash Pashootan Campbell Soup Company CPB-N PARTIAL BUY May 13, 2016

Strong performance lately.
Excellent brand name with mature assets.
Defensive name that won't see major growth.

Will buy Sovos Brands for $2.7 billion all cash. Makes sense, giving Campbell's a growth engine at a time when the stock is out of favour, down 22% YTD. Buy this dip.

Their product line is very mature and offers little growth. This has been a sideways stock. Their snacks business is doing well, but not a growth driver. Either the stock declines and the dividend rises, or they buy another company.

It reports Monday. Trades at 11x PE and pays a 4% dividend, but gross margins have been squeezed due to higher costs--from tariffs. Meanwhile, the weight-loss drugs make you feel full, another headwind.

They just reported and today held their investors' call. They say that high prices are scaring away customers with spending starting to slow last January. There was weakenss in crackers and chips. Not helping are the new 50% tariffs on steel and aluminum, precisely what Campbell soup cans are made of. The company blames general economic weakness, but don't mention the GLP-1 drug. The latter makes sense, not general economic weakness. CPB pays a safe 4.5% dividend, but no, it isn't worth getting paid to wait, not with the weight-loss drugs still selling.

He's starting to see some good volume around the price level right now, potential bottoming. Trying to get out of soup. Acquiring some snack companies. Has the potential and the desire to turn around, though that will take a while. Good value right now. Yield is 4.89%.

Doesn't own yet, but plans to buy with proceeds from sale of other US stocks. Start with only a small position today. If it drops below $29, start reducing.