General Mills (GIS)

People don’t eat cereal as much. They kind of mismanaged their portfolio. It is reliable poor. You want the opposite. Low growth rates. Trying to buy investor’s confidence with higher dividend payouts. Don’t rationalize poorness. Move to something that has some growth.

This company is in a bad place right now. When the cycle turns down, consumer staples will get hurt early. This is not a defensive stock to hide in, due to their weak fundamentals. Yield 4.6%.

This has done reasonably well. As we know, banks are a protected species in Canada. Chart is showing a series of higher lows and higher highs, and feels this could go a little higher. The chart looks pretty good.

This is a name that has really struggled. The sector of staples is struggling. It is a bond proxy structure, so as rates go higher, then this sector is going to struggle. There are better places to go. 3.3% dividend yield.

There has been food inflation in the environment for some time. This is a company, along with a great many other consumer packaged good companies, that struggles for growth. If they can eke out low single digit growth in many, many of their categories, it is a win for them. As an owner of the stock, you have to be very, very careful, because a lot of these companies have been labelled as stable and good dividend producers, but have been bid up, and you are paying 16, 17 and sometimes 20 times earnings for a company that is growing at 2%, 3% or 5%, a huge risk. He would stay away from the sector.

General Mills (GIS-N) or Kellogg’s (K-N)? This one is strictly focused on cereals and is the world’s largest producer. About 20% of their revenues comes from Wal-Mart (WMT-N), which has been actively opening stores increasing their distribution channel. He sees future growth in the cereal market in emerging markets, especially Asia. Their demand for cereal is expected to go up 2X over the next few years. This would be his preferred play.

He tends not to gravitate to the defensive growth stories. The problem that he has with food producers is that there is always a reason why they are missing their numbers or something has gone wrong. Really not his favourite. Prefers beverage companies and would look at PepsiCo (PEP-N). Great company and very well run.

Very stable company. Revenues come off quite strongly last quarter, but looking at it going forward, she feels there is a bit of optimism with lower input prices and maybe new products coming on stream. It really comes down to valuation and she sees it hovering around where it typically does. You’re probably not getting a great deal on this one.

A packaged goods company. 75% US and 25% non-US. Near-term, she thinks the earnings outlook will be somewhat muted. Cereal is a main product for them along with yogurt. With rising grain prices it could affect costs. Also, higher grain prices will affect dairy costs. Have been losing market share in yogurts so may have to increase their spending here.

Packaged foods so a little bit of a challenge if you are talking short-term with regards to input prices for the products. Drought will have an impact on their margins. Decent dividend. Reasonable flattish performance over the last 4-5 years. Nothing to get too excited about in the short run.