General Mills Still Moderately Attractive Despite Price Run Up

RIAanalyst.com: Today we are initiating coverage of three branded food companies with “Buy” ratings on General Mills (GIS: HISTVAL target price 65 vs latest of 57.8) and Heinz (HNZ: HISTVAL target price 36.9 vs latest of 43.5) a “Sell” on Campbell's (CPB: HISTVAL Target 29 vs latest of 30.1). We believe that these are all well-managed, wide-moat companies, with powerful brands, economies of scale, and so on. At the right price any one of these stocks might serve well as defensive equity holdings. At present though, the valuations of General Mills and Heinz are clearly more compelling than Campbell’s based on our HISTVAL methodology and while their potential returns are unexciting we believe they are sufficient for a buy rating on these bread-and-butter consumer staple stocks.

After positive earnings and outlook this week, General Mills is decidedly less interesting today, at almost $58, than it was when we first modeled it on May 27th. Then, just over a month ago, it was trading at $51 vs our target of 64,which was attractive enough for a “strong buy”. Now, after its strong move upwards, its still looking good enough to hold onto, but if it wasn’t in the portfolio we’d probably be looking more closely at HNZ or perhaps passing on the group altogether in search of greater potential elsewhere.

Note: Kraft Foods would also be in this group, but at present our coverage universe is limited to stocks with a complete 10-year fundamental data-set, which we do not have on KFT.

The results of our HISTVAL model findings as well as some quick stats for each stock in this group are shown below. For greater detail, please see the PDF Report. For a step-by-step explanation of our HISTVAL methodology please see this Introduction to Histval(TM).

General Mills (GIS|Buy)
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Heinz (HNZ|Buy)
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Campbell’s (CPB|Sell)
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Group QUICKSTATS
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Details: Formatted PDF

Disclosure: Author is long GIS