Investors think Kraft Foods is a very tasty stock. Whether consumers continue to buy the packaged-food company's goods once price hikes go through are another matter, Morningstar analyst Erin Nash told CNBC on Friday.
"The shares are fairly valued," she said, and have been ever since the maker of Oscar Meyer cold cuts, Philadelphia cream cheese, and Jell-O announced in August it was splitting into two its global snacks and North American groceries businesses.
The split was endorsed by Kraft's biggest shareholder, Warren Buffett, and other investors have since felt the same way. In November, the company raised its 2012 outlook and reported higher-than expected quarterly sales and revenue.
Nash thought the move, which becomes effective next year, was a "value-enhancing endeavor" when it was announced, "and the shares reflect that."
Commodities costs remain high and consumer spending in North America and Europe remains weak, she said, and that means consumers might start trading down to store brands.
Nash has seen signs of "consumers being selective in terms of the brands they choose to continue buying versus the brands they trade down on." With Kraft recently announcing price increases in Europe, "we'll get some idea how volumes are impacted as we head into 2012."
If Kraft's stock is fully valued, are there any other packaged-food companies worth buying? Nash suggests investor look at Kellogg ? The Battle Creek, Mich., company has been investing in product innovation, marketing support for core brands, and infrastructure improvements, she said.
"Some of those investments should yield some improvements in the results into 2012," Nash said.
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Neither Erin Lash nor Morningstar own Kraft shares. No disclosure information was available on Kellogg.