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Ray Merola

 
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  • Sell General Mills And Buy Procter & Gamble [View article]
    Doug L.

    Thank you for the kind words. It appears we have similar points of view. The Annie's acquisition is a step in the right direction, but it won't move the needle. I was hoping GIS would consider Whiteway or similar. Something big.

    For me, the last sentence of your commentary sums it up nicely.
    Oct 5 05:18 PM | Likes Like |Link to Comment
  • Sell General Mills And Buy Procter & Gamble [View article]
    southgent1951

    Thanks for more excellent commentary. 2 thoughts come to mind:

    1. If choosing the a "best of breed" Consumer Staples sector, Food Products stock industry company, General Mills makes my list, though I believe GIS in a rough spot, and the valuation isn't cheap.

    2. I also eat cereal often. However, we are in the demographic "sweet spot" for these products. General Mills is concerned that those in GenX and the Millenial generations are not buying breakfast the way we do. I believe an investor presentation is online via the web site that provide the backup data.
    Oct 5 03:19 PM | Likes Like |Link to Comment
  • Sell General Mills And Buy Procter & Gamble [View article]
    southgent1951

    Your eloquent and fact-based alternate view on General Mills is an outstanding contribution to this board and its readers. Thank you.

    Indeed, I tend to agree with much of the information and analysis found in the links provided. The links also indicated the valuation these cereal stocks isn't overly compelling at these levels, either. All good stuff. A minor factor in selling GIS shares is I don't find the current valuation particularly cheap.

    I suspect we are similar insofar as we don't change horses that often. I certainly didn't take divestiture of GIS lightly after owning the shares for a several years.

    Given its good management and rich corporate history, I suspect The General will come out ok.....in the long run. Perhaps Procter & Gamble will do alright, too; and I'm expecting it to come a little quicker.
    Oct 5 03:13 PM | Likes Like |Link to Comment
  • Sell General Mills And Buy Procter & Gamble [View article]
    Very interesting reconnaissance, jadnash

    Thank you for sharing it. That's a good data point to keep in mind.

    Another anecdote-- I do the food shopping in our household. Over the last year or so, I've noticed that the cereal manufacturers have been doing a lot of discounting and promotions.

    Several years ago, I recall there were investigations opened about cereal manufacturers trying to hold prices artificially high. That seems like a long time ago, now.
    Oct 5 03:01 PM | 2 Likes Like |Link to Comment
  • Sell General Mills And Buy Procter & Gamble [View article]
    djsulli

    Thank you for the kind words.

    One of the advantages of personal investing is that it's ok (and often advisable) to "do nothing." There is no requirement to make moves. Paraphrasing Warren Buffett: "When investing, you can stand all day with your bat on your shoulder. There's no requirement to swing. You can just sit and wait for that one fat pitch."
    Oct 5 02:58 PM | Likes Like |Link to Comment
  • Sell General Mills And Buy Procter & Gamble [View article]
    Thank you for the words of encouragement, maybenot

    I will try to keep meeting or beating your expectations in the future. Good luck with all your 2014 investments.
    Oct 5 02:54 PM | Likes Like |Link to Comment
  • Sell General Mills And Buy Procter & Gamble [View article]
    Nothing wrong with that, BlueOkie

    General Mills and P&G are within the same Sector, but not the same Industry. Therefore, as you point out, they do not compete.

    However, these 2 stocks compete for my investment dollars as I choose to be underweight the Sector overall.
    Oct 5 02:53 PM | 1 Like Like |Link to Comment
  • Sell General Mills And Buy Procter & Gamble [View article]
    BlueOkie

    We have similar views with respect to economic cycles. This is a major driver in my portfolio construction, too. However, we may interpret the cycle a little differently.

    I see the U.S. as in a period of slow economic expansion. Therefore, I favor Industrials, Tech, Materials, and Finance. Consumer Discretionary stocks are a cut below now, as these are often Early Cycle. Energy tends to run it own cycle. (Don't get me started on that sector!).

    I typically overweight Consumer Staples, Utilities, Telecom and Health Care in anticipation of economic contraction.

    Of course, there's nuance. While Health Care isn't a top sector on the cycle, I like bio-pharma anyway, right here and right now.
    Oct 5 02:51 PM | 1 Like Like |Link to Comment
  • Sell General Mills And Buy Procter & Gamble [View article]
    ZokMaster

    I believe General Mills will weather the storm. The question is how, when and at what cost; and versus what investment alternatives. Of late, Yogurt has been a strong suit. The Annie's purchase, while not moving the needle much, indicates a drive towards healthier and organic fare.

    My view is each company (via its stock) is "competing" for my capital. Part of my objective is to make distinctions, and (hopefully) separate the best stocks at the best times.

    Either GIS or PG should be reasonable havens during market upheaval.
    Oct 5 02:43 PM | 1 Like Like |Link to Comment
  • Sell General Mills And Buy Procter & Gamble [View article]
    berloe

    CEOs do make a difference. If Lafley departs, it will be time to reassess the situation and succession plan.
    Oct 5 02:38 PM | 2 Likes Like |Link to Comment
  • Sell General Mills And Buy Procter & Gamble [View article]
    Thanks for commenting, Vandooman

    Just for the record, I currently choose to have only one stock in the Consumer Discretionary sector. I'm not high on the sector, nor its valuation. I'm not in the camp the U.S. is going into recession right now; so I agree that there's better places to put money to work.

    You actually hit on some excellent points that were outside my article:

    First, I am not reinvesting GIS sale proceeds dollar-for-dollar into PG stock. I plan to underweight the shares for the reasons cited above. Furthermore, I like the idea of raising a little cash, just like some others. Finally, while I've got my eye on some fine beat-down industrials, the immediate place I am looking to invest differential cash is overweight is Celgene (CELG) stock. I also am picking at BAC, though I never thought I would ever find myself saying that!
    Oct 5 11:12 AM | 1 Like Like |Link to Comment
  • Sell General Mills And Buy Procter & Gamble [View article]
    Certainly plausible, Nathan

    Just for the record, General Mills YoY revenues were up less than 1% in the most recent fiscal year (ending May 2014). However, sales have been down for the past 3 quarters (versus a year earlier), and the one preceding that was flat. So the top line has not been robust, to say the least. In defense of your premise, GIS management did expect FY 2015 sales to be up versus previous.

    I agree the chance of a dividend cut is essentially nil. The company has gone 115 years without one. Stock repurchase and cost cuts can buy time, but eventually the company will have to grow top line. This may be done organically, or via acquisition. This is where I see a challenge.

    Where we disagree is whether U.S. trends towards ready-to-eat breakfast cereal will reverse. I see this probability as low. My view is that healthier, less-processed, consumer preferences are here to stay. This doesn't mean that breakfast cereal sales will roll of the table. I just think it's in drip-drip-drip secular decline.

    Indeed, we also agree that General Mills will figure a way out. What that is, how quickly, and at what cost are the questions that I am less sure of. I see P&G having less-serious go-forward challenges.



    Oct 5 11:07 AM | 2 Likes Like |Link to Comment
  • Sell General Mills And Buy Procter & Gamble [View article]
    Hi rosenose

    As always, thanks for commenting.

    Indeed, the evidence against GIS isn't conclusive. However, watching revenues and margins dip over the past several quarters (especially U.S. retail sales) caused me to fall past my personal tipping point.

    As noted earlier, part of my "sell" construct is based upon a self-imposed discipline to hold a limited number of core positions. It forces me to evaluate and rank securities. I don't believe General Mills is going down the chutes. However, at least for the medium-term, I think PG has an easier path to prosperity.

    In addition, and beyond the scope of this article, I had a good size position in General Mills. As I sell it down, I do not plan to invest dollar-for-dollar in P&G. It will be a smaller overall position.

    Some of the extra cash: going to Celgene. You may have seen my recent S.A. article on that one.......
    Oct 5 10:29 AM | 1 Like Like |Link to Comment
  • Sell General Mills And Buy Procter & Gamble [View article]
    Wouldn't that be a great development!
    Oct 5 10:22 AM | 3 Likes Like |Link to Comment
  • Sell General Mills And Buy Procter & Gamble [View article]
    Tom

    Very timely comment. Currently, General Mills intends to ramp up advertising, which it a positive. However, a combination of declining revenue and margins force this decision into a "zero-sum" camp....at least for awhile. The purchase of Annie's stock further stretches a balance sheet that wasn't really robust in the first place. These issues clouded my forward prospects for GIS, too.
    Oct 5 10:21 AM | 2 Likes Like |Link to Comment
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