THE LONG VIEW

The Chef’s Warehouse (NSDQ: CHEF)

Gourmet growth. The specialty foods distributor blew past second-quarter 2013 estimates, with a 48 percent jump in sales. Earnings per share (EPS) came in at 25 cents per share, up 19 percent.

As its industry’s consolidator, CHEF is in the process of integrating its latest acquisitions—Michael’s and Qzina—with the goal of making three to four purchases each year. Management expects EPS of 90 to 98 cents for all of 2013.

MOSAIC (NYSE: MOS)

Not fertile ground. Mosaic’s shares have sold off due to the likelihood of falling potash prices as more supply comes into the world market. Potash, used in fertilizer, is Mosaic’s major product.

Until recently, the price of potash was controlled by two major cartels: (1) North America’s Canpotex, to which Mosaic belongs; and (2) BPC, a venture between Russia’s Uralkali and Belarus. At the end of July, the second cartel suddenly fell apart, with both members now likely to increase output.

This is bad news, since the annual global supply of potash (43 million tons) already outstrips demand (35 million tons). Analysts note that not one commodity has ever returned to cartel pricing once the cartel has broken apart.

We suspect potash prices will move lower from current levels, especially exports to India and China. Since Mosaic gets 70 percent of its revenue outside the US, it’s likely to be heavily affected. Mosaic shares are now a SELL.

Kroger Co. (NYSE: KR)

A winning bid. Already the nation’s largest grocery store chain, Kroger has agreed to buy Harris Teeter Supermarkets (NSDQ: HTSI) for $2.5 billion, giving it a major presence in the Carolinas and Virginia. Kroger will finance the purchase with debt and expects to realize annual cost savings of $40 to $60 million in the next four years.

This deal would be the fourth-largest purchase of a North American food retailer in the past 10 years. It’s also Kroger’s biggest takeover since 1998, when it bought Fred Meyer for more than $12 billion.

THE FINAL COUNT 

SodaStream Int’l (NSDQ: SODA)

Bubbly results. SODA’s do-it-yourself carbonatedbeverage machines continue to attract buyers and repeat users worldwide. Sales for second-quarter 2013 jumped 29 percent while earnings soared 36 percent. Both soda machines and supplies saw strong growth of 25 percent and 28 percent, respectively.

After these surprisingly good results, SODA bumped up its guidance for all of 2013. It now expects earnings to rise 23 percent this year on a 30 percent sales increase. SODA remains a BUY due to its strong growth prospects.

Graco (NYSE: GGG)

Painting the town. Slow but steady economic growth and improvement in the construction market is driving demand for Graco’s paint and finishing equipment. Second- quarter 2013 earnings were up 64 percent, jumping to 92 cents per share from 56 cents in the same period last year. Sales for the quarter were up 7 percent, including a 14 percent increase in revenue from the Americas.

Baring another global recession—which seems unlikely, thanks to low interest rates and central bank commitment to quantitative easing—Graco is on track to achieve management’s goal of increasing revenue 6 percent and earnings 12 percent each year. This growth should continue to fund annual increases in the dividend, making Graco a solid long-term bet for conservative investors.

IQ Merger Arbitrage ETF (NYSE: MNA)

The urge not to merge. Merger and acquisition (M&A) activity has ticked up in some sectors, such as health care, food retail and newspapers, including some megadeals. But when measured in dollars, global M&A activity dropped 10 percent in the first quarter of 2013.

Low business confidence has helped ensure that companies hold on to their record levels of cash, while trillions in private equity dollars remain on the sidelines.

Due to weak M&A activity, MNA has underperformed the S&P 500 by nearly 18 percentage points during the past year. With little chance of closing that performance gap in the near term, there’s not much reason to stay invested in this fund.