A while back, I took a look at the fact that Kellogg's (NYSE: K) would not renew its sponsorship of Olympic swimmer Michael Phelps -- thanks to "Bonggate." I saw an article earlier this week, an article that was brought to my attention by my hero Darren Rovell over on his blog, that K's decision benefited the San Francisco Food Bank.As long as someone needing food in the San Francisco area is not adverse to a picture of Michael Phelps (sans bong) on their Corn Flakes, they will find their bounty at the San Francisco Food Bank. According to this article, K donated nearly 2 tons of cereal to the food bank - reportedly from their Portland, Oregon distribution center. Rovell was told that the cereal firm is eligible for a tax deduction in the realm of $15,000 for the donation.
Gayle Keck, of the San Francisco Food Bank stated, "Though Kellogg's and their star spokesman hit a patch of rough water, San Francisco's hungry just got thrown a life preserver." While full of bad puns, the statement is accurate and piqued my interest in K's performance (which is why we are looking at a food firm in JockStocks).
K has fallen steeply during the past five months, and it has taken out long-term support in the $41 region in the process. Prior to last month, the stock hadn't closed below the $41 level since 2004. While a rally could result in the stock reclaiming this level, I am concerned about a recent bearish cross between K's 10-month and 50-month moving averages. This technical formation could signal a downtrend, and the fact that the 50-month moving average is involved hints at the potential strength of this slump.
If there is good technical news for K, it seems that the $36 level is ready to provide some short-term support. Unfortunately, all short-term support has fallen as the shares fall (most notably the round-number $40 level), and the $36 level will more than likely need some sort of help.
Fundamentally, if (if, if, if, can I stress if?) the economy is turning around things could pick up for K? We could see some people migrate from cheaper, store-brand versions of K's cereals - but will that be enough to help the stock? I'm not sure - especially in this current atmosphere of frugality. If you are interested in this cereal stock, I'd recommend waiting to see if it can form some sort of bottom before jumping in. Where is the bottom? Not sure: do your own research and make your best guess.
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