Kraft Foods, Inc. (KFT) completed its sustainable growth plan, which included capacity rationalization, SKU reduction, and cost savings programs; however, the results were unsatisfactory. Therefore, in February 2007, management announced a new turnaround strategy to revitalize the company's growth. Concurrent with the announcement, the Board approved a significant $5 billion share repurchase program. The new strategy has generated a significant turnaround in organic revenue growth. In mid-February 2008, Berkshire Hathaway (BRKA) disclosed that it owns an 8.6% stake in Kraft Foods. Management has increased its focus on brand- building and new product initiatives, which have resulted in constant currency revenue growth of 5.1% in 2007.

With Kraft having been spun-off from Altria Group, Inc. (MO) in March 2007, Kraft's management has become more focused on the company's operational challenges. In order to strengthen the company's presence in various categories and to enhance the company's position in both developed and developing markets, Kraft has acquired several of companies. Additionally, management has focused the portfolio of brands through divestitures. In February 2007, management announced the three-year Turnaround Plan in order to revitalize the company's growth. In 2007, the program enabled the company to generate organic revenue growth of 3.6%, 4.1%, 6.2%, and 6.2% in first, second, third, and fourth quarters, respectively. This is the best organic top-line growth generated by the company since 2001.

Kraft Foods generates strong cash flow that allows management to re-invest in the company and return value to shareholders. Since the company's IPO in 2001, management has increased dividend more than 12% on a compound annual basis. Prior to June 13, 2001, Kraft was wholly owned by Altria (formerly known as Philip Morris). Since the stock offering in 2001, the current Kraft stock has traded between a 13 to 22 P/E multiple. With the turnaround in organic revenue growth and positive earnings comparisons expected to begin with the second quarter of 2008, the stock appears attractive. The Buy recommendation is maintained. The target price of $38.50 is based on a 20 P/E on this year's earning estimate of $1.93.