Q. What are the prospects for my stock in ConAgra Foods Inc.? - PV, via the Internet

A. This diversified packaged food giant, known for famous brands such as Healthy Choice, Parkay, Banquet, Peter Pan, Chef Boyardee and Orville Redenbacher's, is facing challenges.

Dragging on its results have been higher prices for potato products plus ongoing weakness in the restaurant and institutional cafeteria businesses that it supplies.

Yet it continues to move ahead, investing in marketing, product innovations and streamlining of its operations. It is putting greater emphasis on its more profitable brands, as well.

The firm recently completed its acquisition of American Pie LLC, a maker of desserts and frozen dinners under the Marie Callender's and Claim Jumper brand names. The new additions, which include pies, fruit cobblers, pot pies and appetizers, combine with the company's existing Marie Callender's frozen items.

Turning to its existing products, it recently extended its Snack Pack pudding flavours to include Blueberry Muffin, Cinnamon Roll and Sugar Free Caramel.

ConAgra Foods shares are up three percent this year following a 44 percent gain last year. Earnings fell 48 percent in its most recent quarter due in part to the poor potato crop. Consumer foods sold in grocery stores, representing two-thirds of its overall revenue, were down slightly.

While the fact that more Americans are eating at home is a positive for ConAgra, it must also compete for grocery shelf space with improved, reasonably-priced private-label products. In addition, commodity, packaging and distribution costs are always financial variables. Another food company concern: It pulled two types of frozen dinners off store shelves this spring due to salmonella risk.

Consensus analyst rating of ConAgra is a strong "hold", according to Thomson Reuters, consisting of two "strong buys", two "buys" and seven "holds".

A criticism of ConAgra is that, other than its 15 highest-sales brands that include Lamb Weston, Act II and Pam, it has a large number of lesser-name products that struggle to retain shelf space with more popular food items. It sold off some underperforming brands, but a portion of its portfolio remains lacklustre.

Gary Rodkin, with more than three decades in the packaged food industry that included time at General Mills and PepsiCo, has since 2005 been the leader of this 90-year-old firm.

Earnings are expected to rise 10 percent this fiscal year and eight percent the following fiscal year. The projected five-year annualised gain of 11 percent compares to nine percent expected industry-wide.

Q. Is Vanguard Wellington still a fund I should continue to hold in my portfolio? - BN, via the Internet

A. This giant fund has been around since 1929 and it is easy to see why it survived.

Investors like its strong long-term record, ample diversification and modest volatility.

Around two-thirds of portfolio is in stocks and about one-third in bonds, with a smattering of cash. Foreign stocks represent only 13 percent of total portfolio assets.

The $47 billion Vanguard Wellington Fund had a one-year return of 18 percent that ranks at the mid-point of moderate-risk allocation funds. Its three-year annualised decline of about two percent places it in the upper one-fifth of its peers.

"This fund has done well over the years against a variety of different strategies, such as various stock funds, long and short funds, alternative funds and hedge funds," observed Dan Culloton, analyst with Morningstar Inc. in Chicago. "It has done so with the very simple strategy of buying high-quality, dividend-paying, undervalued stocks and holding them."

Veteran investor Jack Keogh has been lead fixed-income manager since 2006, while Ed Bousa has been in charge of the equity portfolio since 2002. Both have invested more than $1 million of their own money in the fund, a good sign their interests align with shareholders.

Wellington tends to have a slightly larger stake in stocks than most moderate-allocation funds and is more willing to hold longer-term bonds than are many competitors. It doesn't own a lot of technology stocks.

"This is the quintessential core holding and can be a stand-alone holding for some people," explained Mr. Culloton, noting it owns mostly corporate rather than government bonds. "But because it is such a huge fund, it can't really delve down into small and mid-cap stocks."

Financial services represent 18 percent of the overall portfolio, with healthcare, energy and industrial materials each at about 14 percent. Top holdings were recently AT&T Inc., Wells Fargo Co., US Treasury notes, Chevron Corp., IBM, Pfizer Inc., Merck & Co. Inc., JP MorganChase & Co., ExxonMobil Corp. and Eli Lilly & Co.

This "no-load" (no sales charge) fund requires a $10,000 minimum initial investment and has a low annual expense ratio of 0.34 percent.

Q. What are the differences in size between small-, mid- and large-cap stocks, which I hear about all the time? - MK, via the Internet

A. Those designations are based on a company's market capitalisation, which is the number of shares outstanding multiplied by the price per share.

While large-to-small seems a simple enough continuum, it is not an exact science because different brokerage firms and investors use different cut-off points. That means these terms are more general than pinpoint measures.

Large-cap stocks are typically giant companies with market caps of more than $10 billion; mid-cap companies usually have market caps of $2 billion to $10 billion; and small-cap firms are less than $2 billion.

The greatest amount of research information is available for large caps, while lesser-known small caps can provide upside surprises. Mid caps offer perhaps the best of both those worlds. Mutual funds often opt to focus on one market-cap area, providing investors with a concept of what to expect.

"It is important for investors to understand the difference, but more important to understand the importance of diversifying among the different market cap sizes," advised Christine Benz, director of personal finance for Morningstar Inc.

Andrew Leckey answers questions only through the column. Address inquiries to Andrew Leckey, 555 N. Central Ave., Suite 302, Phoenix, Ariz. 85004-1248, or by e-mail at andrewinv@aol.com

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