Q: What are your expectations for my shares of Kellogg Co.? It is a longtime holding. -- C.M., via the Internet
A: The world's largest cereal-maker has powerful brands and a knack for introducing successful products.
Special K, Pop Tarts, Eggo, Keebler cookies and crackers, Frosted Flakes, Corn Flakes and Fruit Loops are among its famous products. It also regularly serves up new items, such as Special K with Red Berries.
Second-quarter profits increased 13 percent on North American and European gains, with sales rising 9 percent. Even with commodity costs rising, the company is standing by its full-year earnings forecast.
But the highly competitive food industry remains challenging.
Under pressure from parents and nutrition advocacy groups over childhood obesity, the company recently announced it will institute new nutrition standards for cereals and snacks. If it is unable to match the taste of its products, it said it won't change the products but will stop marketing them to children under age 12. It also agreed to restrict advertising that uses licensed media characters such as Shrek.
Like other packaged-food companies it raised prices for many products in reaction to higher cost of wheat, corn, rice and cooking oil. One plus is that the Department of Agriculture estimates that farmers have planted 19 percent more acres of corn than expected, which may provide some relief.
Rising milk, fuel and energy prices have further put a strain on the industry.
Kellogg stock (K) is up 5 percent this year following a gain of 16 percent last year. It recently increased its quarterly dividend by 6.5 percent, payable on Sept. 14 to shareholders of record as of Aug. 31.
It has a strong chief executive in David Mackay and has enjoyed several years of solid sales growth. Nutrition-oriented products such as Special K meal-replacement bars and beverages are doing well, particularly its single-serve 100-calorie packs.
The consensus rating on shares of Kellogg is currently "buy," according to Thomson Financial, consisting of seven "strong buys," eight "buys" and six "holds."
Kellogg employs about 26,000 people worldwide and is investing in manufacturing and distribution improvements. It will record up to $85 million in charges from reorganization of its delivery operations in the Southeastern U.S. through relocation or cuts of about 300 jobs.
Earnings are expected to rise 10 percent this year compared with 7 percent forecast for the processed and packaged goods industry. Next year's projected increase is 10 percent versus 13 percent expected for its peers. The forecast of a five-year annualized growth rate of 9 percent is in line with the industry.
Q: Are there any good reasons to invest in Fidelity Canada Fund, which has done so well? What's up with that? -- R.M., via the Internet
A: As an international force in energy, metals and mining, Canada benefits greatly from the boom in natural resources.
The strong Canadian dollar and the economic boost given large Canadian banks from increased deposits and loans have helped the country's stocks.
The $3.8 billion Fidelity Canada Fund (FICDX) has had a total return of 31 percent over the past 12 months to rank in the top 10 percent of all foreign large growth and value funds. Its three-year annualized return of 30 percent places it in the top 3 percent of that category.
"If an investor wants a Canada fund, this fund is pretty attractive and there isn't much competition," said Dan Lefkovitz, analyst with Morningstar Inc. in Chicago. "However, if the commodity boom loses its legs, if the Canadian dollar weakens or if the Canadian economy slips, this fund could have a really tough time."
Because it is restricted to a single, relatively small stock market that can be volatile, Lefkovitz cautions investors to have it make up only a small percentage of a personal portfolio.
Maxime Lemieux, who joined Fidelity in 1996, became Fidelity Canada portfolio manager in 2002. He has also since 2000 managed a small-cap and mid-cap fund available to Canadian investors. Lemieux avoids stashing all the assets in booming commodities by including other stocks such as BlackBerry-maker Research in Motion Ltd. and clothing company Gildan Activewear Inc.
Fidelity has Canadian exposure in a number of other funds and several research analysts focused specifically on that country.
Financial services and energy each represent about one-third of the fund's holdings, with additional concentrations in industrial materials and business services. Largest holdings are Manulife Financial Corp., Royal Bank of Canada, The Toronto-Dominion Bank, Bank of Montreal, Suncor Energy Inc., EnCana Corp., Rogers Communications Inc., Canadian Natural Resources Ltd., Telus Corp. and Canadian Imperial Bank of Commerce.
This "no-load" (no sales charge) fund requires a $2,500 minimum initial investment and has an annual expense ratio of 0.97 percent.
Q: How does a reverse mortgage work and who is it best for? It seems to make sense. -- F.T., via the Internet
A: A reverse mortgage is a loan against your home that you don't have to pay back while you live there. It permits you to turn your home's value into cash, precluding the need to move or to repay the loan monthly.
Eligibility requirements for most reverse mortgages are that you own your home and are 62 years of age or older.
These can be either government-backed or private loans. Careful research is required, because the fees charged can be costly.
"Essentially, the lender makes advances to the homeowner against the equity in his or her home," said Peter Bell, president of the National Reverse Mortgage Lenders Association in Washington, D.C. "The money can come out through an established line of credit that can be drawn out as needed, as a lump sum up front, or as a regular monthly cash advance."
You'll receive some percentage of the equity of your home based on factors such as its value, interest rate considerations and, most important, your age, Bell said. Funds advanced plus accrued interest must be repaid upon the home's sale or the homeowner's death, in the latter case by the estate.
Andrew Leckey is a Tribune Media Services columnist. E-mail him at email@example.com.