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Friday, 03/12/2004

Are you Seeking a Fortune?
By Nich Sheldon
FO - Fortune Brands

Company Description

Fortune Brands, Inc. is a $6 billion leading consumer brands company. Its operating companies have premier brands and leading market positions in home and hardware products, spirits and wine, golf equipment and office products. Home and hardware brands include Moen faucets, Aristokraft, Schrock, Diamond and Omega cabinets, Therma-Tru door systems, Master Lock padlocks and Waterloo tool storage sold by units of Fortune Brands Home & Hardware, Inc. Major spirits and wine brands sold by units of Jim Beam Brands Worldwide, Inc. include Jim Beam and Knob Creek bourbons, DeKuyper cordials, The Dalmore single malt Scotch, Vox vodka and Geyser Peak and Wild Horse wines. Acushnet Company's golf brands include Titleist, Cobra and FootJoy. Office brands include Swingline, Wilson Jones, Kensington and Day-Timer sold by units of ACCO World Corporation. Fortune Brands, headquartered in Lincolnshire, Illinois, is traded on the New York Stock Exchange under the ticker symbol FO and is included in the S&P 500 Index.

[Source: Company Press Release]

Reasons to Invest:

This week's bearish activity has bulls scratching their heads. The INDU Dow Jones Industrial Average plummeted this week, as it lost 467 points by Thursday's close. If the 100-DMA didn't turn out to be support today, we just might have seen a return to 9000 in the next few sessions. It's easy to see that the market is certainly unruly at the moment, thus making this week's Drip selection even more difficult to pinpoint.

However, I am in high spirits when I say that I believe we could see further upside in Fortune Brands (NYSE:FO). Even though our market is being supported by a weak dollar, plenty of money has been distributed into Fortune Brands's whiskey, bourbon, and wine.

Their Q4, year-end, results were in the green as Fortune Brands revenues grew by 9%. Their operating margin expanded by 19% and net income rose by 10% to $579 million. The company reported that the increase in their figures is largely due to the fact that their Moet faucets, Master Lock padlocks, Jim Beam-spirits, and Cobra golf products all outperformed or sold above expectations in the fourth quarter.

On top of that, FO said that they are targeting double-digit growth in diluted EPS before charges/gains, for the full year of 2004. If FO was to achieve this task their net income would be right around $640 million

Standard and Poor has a 5 star rating on FO and has a recently raised target price of $87 by year end (old target price was $83).

It's hard to imagine what really caused this cyclical to take off. This quiet American company has the same chart as most of the stocks traded on the NYSE. In March of 2003 the company trended into a tight range regression channel, of which has served as support and resistance for the stock for an entire year (now). Even this past week of profit seeking couldn't cause the stock to remain below its lower channel bars for more than one session. Today, the 50-DMA served as holding grounds for FO, as the stock used this level to bounce back into its range bound channel.

Last Friday FO set a new all-time high of 73.75 and I am anticipating a retest of this level in the coming weeks. The MACD on the daily chart is currently on a sell signal on this week's recent weakness, but the monthly and quarterly chart are still noting a buy signal. The point and figure chart on FO represents a 3-box reversal chart. I have a bullish price objective of 125.00 on Fortune Brands.

Reuters has a no risk rating on new positions of FO. They have a dividend percentage growth rate expectation of 14.71 percent over the next year and 6.60 percent over the next five years.

On January 27th, FO declared a regular dividend of $0.30 per share of common stock, which tallies out to a an annual dividend yield of 1.69 percent. The payable date for the dividend WAS March 1st, 2004 to shareholders on record as of February 11th. The company also declared a regular dividend of 66.75 (cents) per share on their Convertible Preferred Stock. This dividend held a payable date of March 10th, 2004, to shareholders on record as of February 11th.

This ends another exciting episode of the Drip of the Week. Stay tuned next week, as we will spotlight another stock worthy of the limelight.

Until Next Week,
Nich Sheldon

Broker Recommendations

Strong Buy         3
Buy                3
Hold               0
Sell               1
Strong Sell        0

Brokers Covering   7

DRIP Information:
Shares to Qualify = 1
Auto-reinvestment = No
Accept Foreign Accounts: Yes
Temper Enrollment: Yes

Min/Max Investment = $50-$15,000/Quarter

Reinvestment Fees - 
Dividend investment fees: 0
Cash investment fees: 0
Auto reinvestment fees: N/A

Transfer Agent:
Bank of New York

Corporate Headquarters:
300 Tower Parkway
Lincolnshire, IL 60069
Phone: (847) 484-4400
Fax: (847) 478-0073


Copyright 2003

Do not duplicate or redistribute in any form.
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