Kraft Foods Inc. (NYSE: KFT) is about to unlock a lot of value for patient investors.
I chose Kraft Foods as my first "Buy, Sell or Hold" pick of 2011 as a hedge against inflation. At the time the world was looking at food inflation caused by fires in Russia, rains in Australia, and droughts in China.
The move paid off. In a market that had dropped by as much as 20% in the last two weeks, Kraft is still up about 8% since my recommendation.
Kraft is the very definition of slow, stable value, and in times of fear and uncertainty, nothing is more defensive than food. That is exactly why I recommended the stock at the beginning of the year, and why I believe it's a "Hold" today.
But that's not all. A recent development has given investors yet another reason to hold on to Kraft.
Kraft Foods - which is currently the second-largest global-food company, behind only Nestle SA - announced on Aug. 4 it was going to split into two.
It's going to separate its global snacks operations from its North American grocery business, creating two independent companies.
One company will include its European and developing markets units and will hold brands like Oreo cookies and Cadbury chocolates; it will have revenue of $32 billion.
Meanwhile, the North American grocery business, with revenue of $16 billion, will include such brands as Oscar Mayer processed meats and Kraft macaroni and cheese.
The news was a surprise since Chief Executive Officer Irene Rosenfeld - who favors big companies - said just 18 months ago that "scale is a source of great competitive advantage."