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12/03/2013 7:00 am EST

Focus: STOCKS

John Dessauer

President, John Dessauer Investments, Inc.

Do not fall prey to pessimistic stock market predictions, suggests John Dessauer, who believes that, for now, the best investment strategy is to hold on to stock positions. In his John Dessauer's Outlook he reviews two of his holdings—both in the food sector.

Cheesecake Factory (CAKE) is a financially strong company that is committed to share buybacks. Cheesecake Factory bought back 2.1 million shares at a cost of $90.2 million in the third quarter.

Management plans on spending $65 million to buy back shares in the fourth quarter. That is an increase of $30 million over previously announced buyback plans. The current plan is to buy back $200 million worth of shares.

Third quarter adjusted earnings were $0.52 per share, 6.1% better than last year. For all of 2013, the current estimate is $2.12 a share. For 2014, the current estimate is $2.38 a share, a 12% year-over-year increase.

Cheesecake Factory has an affluent customer base and no debt. Thanks to share buybacks, earnings per share are likely to keep rising at double-digit annual rates, even if sales growth remains modest, due to the sluggish US economy. My advice is to buy Cheesecake Factory below $43 per share.

Kraft Foods (KRFT) reported third quarter results that included complicated accounting matters. There was a $0.18 per share boost from gains in the company's retirement plans, and a loss of $0.05 from hedging activities.

Sales were down about 4%, because last year's third quarter was swollen by inventory moves ahead of the split-off of Mondelez.

Management says the environment remains difficult, due to high unemployment and slow growth. The good news is that the dividend was raised last month. The annual dividend is now $2.10 a share. Management has raised the earnings target for all of this year to $3.58 a share.

Kraft is a stock to own for dividends and modest capital gains. My advice is to buy Kraft when the dividend yield is 4% or better. That means at $52 or less.

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