Dear Mr. Berko:

ConAgra yields nearly 5 percent and is a huge food sales company. Sara Lee yields nearly 4 percent and is a big food and apparel company. I would like to buy 100 shares of each, which would give me a blended yield of about 4.5 percent. Both are well-known companies with name-brand items that are sold in almost every store in the United States and many foreign countries. Please tell me what you think about these two stocks. I would hold them for about two years because (in addition to the dividends) I think I can make a good capital gain on each.

C.J., Elgin, Ill.

Dear C.J.:

ConAgra Foods Inc. (CAG-$22.81) is among the most disappointing stocks I’ve owned in the past 16 months. CAG, with $14.5 billion in revenues, operates one of the largest packaged food businesses in North America and sells a cornucopia of magnificent and delectable products to retail grocers, restaurants and food service establishments. One would think that a company with brand-name products such as Chef Boyardee, Blue Bonnet, Armour, Hunt’s, Butterball, Fleischmann’s, Hebrew National, Gulden’s, Pam, Parkay, Libby’s, La Choy, Peter Pan, Van Camp’s, Reddi-wip, Healthy Choice, Slim Jim and so many more would be able to increase its revenues and profits at an attractive rate. Sorry, Charlie, it seems that I may have goofed.

My contact at CAG is no longer with the company and left their employ because, and this is a quote, “Management is the sorriest group of idiots that I’ve ever had the displeasure of working with.” Personally I have no reason to disagree.

Bruce Rhode is CAG’s chairman, chief executive officer and chairman of the executive committee. Since his tenure began in 1998, cash flow has crashed, the share price has fallen from $34 to $22, paid dividends have grown from 45 percent of profits to 72 percent of profits, long-term debt has almost doubled and return on shareholder equity has fallen nearly 50 percent.

The executives are textbook failures, and the past five years are a vivid testament to their useless skills. They are only one reason that CAG has failed to increase in value while the Dow rose from 9,000 to more than 10,500. If this stock is to appreciate, these sad sacks must be sacked (so should the CAG board) and the reins must be given to a new team with testosterone in their blood.

It’s deplorable that this once highly respected, venerable, blue-blood company has been ruined. CAG’s downfall is another example of a do-nothing board of directors that doesn’t know spit from Shinola.

Standard & Poor’s recommends that CAG be sold, Morningstar’s Bill Ferguson doesn’t care a whit for the company, Prudential downgraded the stock to “underperform” several months ago and I’d stay far, far away even though the dividend yields 4.8 percent.

Sara Lee Corp. (SLE-$19.26), another disappointment, has been trading flatter than a flapjack. The management of this $20 billion revenue company doesn’t have the depth needed. With world-famous brand names like Jimmy Dean sausage, Hillshire Farm, Playtex, Hanes, Earth Grains and more, one would think SLE would be a world powerhouse rather than a flophouse. Well, SLE has the same problem as ConAgra. Executives wouldn’t know a sausage from a key lime pie.

Revenues were $20 billion five years ago, and they’re $20 billion today. Operating margins haven’t budged from the 11.3 percent performance of 10 years ago, while net profit margins have been falling like sparrow droppings from a high oak tree to 5.7 percent from 6.8 percent. Meanwhile, long-term debt more than doubled in the past decade, while book value gained 20 cents. SLE’s futile management should have been sacked years ago. In 2001, management initiated a restructuring program with a great deal of fanfare and promises. And nothing happened.

Now management is undertaking another restructuring program by selling its U.S. coffee business and its European meat and apparel businesses. So far, nothing has happened, and 90,000 stockholders are still sucking their thumbs.

SLE managers have proved that they are failures and that they’re fantastic at failing. Though the Dow has risen strongly in the past three years, SLE shares have not participated. As one large fund manager told me recently, “Sara Lee is a patent example of a stock that’s going nowhere, because its management can’t figure out where to go.” This fund manager knows several of the big shots at SLE and said of them: “I wouldn’t pay those ignoramuses to cut my lawn, because they’d probably use dull scissors.” Certainly J.P. Morgan, Standard & Poor’s, Merrill Lynch and S.G. Cowan & Co. agree and I agree. Sara Lee is for losers.

Please address your financial questions to Malcolm Berko, P.O. Box 1416, Boca Raton, Fla. 33429 or e-mail him at malber@adelphia.net.

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