Jim Regan

Eyeing Ralcorp Hungrily

This is a nice article, but I fear that you are missing the big picture. Namely, how the heck does a private label get away with acquiring Post, an underperformer in the past that fits as a direct opposite to everything that Ralcorp stands for.

If private label is going to outperform, their entire portfolio is now diluted 20% by Post products that according to the thesis... nobody should be buying. If, however, you want to make the argument that they are positioning for a rebound... why wouldn't you simply want to hold a more premium brand that has none of the private label on their books (i.e. Kellog, Gen Mills).

Seems like a play to be made in January of 2008 to me, and we might be over-extending ourselves to find a new reason to hold this name through a rebound. People like that status symbol that tracks along with premium brands... and may not want to opt for the big ugly private labels once they can afford better.

Your thoughts?