Food for thought: manufacturers of consumer staples, such as food, can deliver delicious profits in a slowing economy. (Mutual Fund Focus).

It happens whenever the economy sputters. Wall Street develops an appetite for food stocks the minute bad news crops up. Once there's talk that a recession is coming, shares of companies like General Mills (NYSE: GIS), Kellogg (NYSE: K), or even Wrigley (NYSE: WWY) start to climb. And sure enough, funds that have large investments in those types of shares tend to join the rally as well.

No, Wall Street isn't necessarily full of compulsive eaters. Instead, investment pros have come to look at food stocks as a comfort, and go so far as to label companies in the sector as consumer staples. What they mean by the term is that demand for these products remain constant; companies that process, manufacture, and sell food will probably see steady sales and solid earnings no matter what else is happening in the economy. Yes, when money is tight and budgets are crimped, consumers may postpone the purchase of a new ride or hold off on lavish vacations. But no matter how tough things get, nobody plans to stop filling the refrigerator.

Look at last year's stock market stats and you'll see that investment pros were already starting to get hunger pangs. At the end of October, the Standard & Poor's index for food stocks was down just 3.4%, compared to a 15.3% drop, recorded by the S&P 500. At the same time, mutual funds with heavy weightings in the food industry were holding strong. Take for example, the Fidelity Select Food & Agriculture (FDFAX), a portfolio that had a little more than 70% of its assets parked in food stocks--more than any other fund, according to Morningstar data. As of October 31, Fidelity's food fund was off just 3.3% for the first 10 months of 2001, yet, it gained a 6.9% total return over the previous year.

S&P's investment strategist, Sam Stovall, thinks the food industry could well continue a strong showing in 2002. For one, prices for key ingredients, such as corn, soybeans, and wheat remain low. Also, food shares are relatively cheap compared to the broad market. "While S&P'S investment outlook for food stocks have moderated, they could regain investor interest should this recession last longer than anticipated," he says.

We kept those projections in mind as we sifted through Morningstar data looking for a few food funds that could provide you shelter should the stock market skid in the months ahead. While we screened Morningstar's numbers, we looked for funds that had invested 10% or more in food companies. We also aimed for an extra layer of protection in case of market troubles ahead, targeting funds that were heavily invested in other consumer staple stocks, including companies that make soap, detergent, and household products. Those other consumer staples are bound to hold up well in a storm for the same reasons that food stocks should--most everyone finds money to pay for cleansers and toothpaste.

After sifting through the numbers, we came up with five funds. Some, such as the Fidelity portfolio we mentioned earlier, were narrowly focused, concentrating on the food industry and consumer staples almost exclusively. Others, such as the Mairs & Power Growth Fund (MPGFX), invest in numerous industry groups, but still choose to carry a heavy percentage of food companies.

When ranked by three-year average annual total returns, the Mairs & Power portfolio led our five funds. Thanks to stakes in General Mills, and meat packer Hormel, the fund has managed a 12.7% average total return over the three-year period that ended October 31, 2001--although, it was down 4.1% for 2001, when this story went to press. Second place among our five goes to Icon Leisure & Consumer Staples (ICLEX), a portfolio that carries a 22.3% weighting in food shares, including positions in Smucker's (jams, jellies, and preserves), Smithfield Foods (pork products), and Suiza Foods (milk and dairy products). The defensive stance helped the fund log a 6.8% total return for 2001 through the end of October.

Top Performing Consumer Staple Stock Funds

                                                1-Year   3-Year
                                       Food      Ann.     Ann.
                                      as % of   Total    Total
Fund Name (Ticker)                    Assets    Return   Return

Mairs & Power Growth (MPGFX)           10.97%    4.14%   12.67%
Liberty Growth & Income A (CFGAX)      11.26     0.48    11.41
Icon Leisure & Consumer Staples
  (ICLEX)                              22.25     9.73     8.11
Fidelity Select Food & Agriculture
  (FDFAX)                              44.15     6.92     2.32
AmSouth Select Equity A (ASECX)        29.54     9.82     1.52
Yacktman (YACKX)                       18.41     8.05     1.40
Rydex Consumer Products Inv (RYCIX)    16.37    -2.74    -3.07
Strong Mid-cap Disciplined (SMCDX)     12.08    -0.97      N/A
Liberty Tax-Managed Value A (SRVAX)    11.61    -0.18      N/A
Yacktman Focused (YAFFX)               18.75     0.49    -4.00

                                      5-Year                  Minimum
                                       Ann.     Toll-Free     Initial
                                      Total                   Invest-
Fund Name (Ticker)                    Return      Number       ment

Mairs & Power Growth (MPGFX)          13.97%   800-304-7404    $2,500
Liberty Growth & Income A (CFGAX)     15.92    800-322-2847     1,000
Icon Leisure & Consumer Staples
  (ICLEX)                               N/A    800-764-0442     1,000
Fidelity Select Food & Agriculture
  (FDFAX)                              9.55    800-544-8888     2,500
AmSouth Select Equity A (ASECX)         N/A    800-451-8382     1,000
Yacktman (YACKX)                       4.84    800-525-8258     2,500
Rydex Consumer Products Inv (RYCIX)     N/A    800-820-0888    25,000
Strong Mid-cap Disciplined (SMCDX)      N/A    800-368-1030     2,500
Liberty Tax-Managed Value A (SRVAX)     N/A    800-322-2847     1,000
Yacktman Focused (YAFFX)                N/A    800-525-8258     2,500

RANKED BY THREE-YEAR TOTAL RETURN

SOURCE: MORNINGSTAR INC. AS OF OCTOBER 31, 2001