Kellogg keeps rolling along

Posted Nov 2nd 2009 5:00PM by Joseph Lazzaro
Filed under: Kellogg Co (K), Stocks to Buy

Kellogg Company (NYSE: K) is another one of those sleep-well-at-night consumer non-cyclical stocks, hence it goes without saying that I'm reiterating my Buy rating for the company, first recommended on April 13, 2009 at a price of about $40. If you purchased K at that time, you're up 15%.

Look for Kellogg's FY2010 revenue to increase a decent 4-6%, aided by tolerable commodity cost increases, and modest pricing power.

Further, Kellogg will also to continue to benefit from the U.S. 'frugal consumer' trend, as more Americans eat breakfast at home, which right now is outweighing some sales attrition due to the rise of generic substitutes. Meanwhile, Kellogg's cost reduction efforts will also benefit results in 2010. The First Call FY2009/FY2010 EPS estimates for K are $3.17 to $3.59.

Technically, Kellogg's stock chart looks beautiful: a stairway -- one in which the stock rarely touches the key 50-day moving average. That ability to remain above the 50-day moving average indicates that institutional investors (IIs) are continuing to add to their K positions.

Stock Analysis: Kellogg is a moderate-risk stock. If you've already purchased the company's shares, hold them. If not, consider buying a 50% position in K now; then buy another 25% in one month, if U.S. and global economic conditions don't worsen substantially. Under any circumstance, don't buy more than 75% of your K position before December 2009. Sell/Stop Loss if you were to buy shares in this company: $27.

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Disclosure: Lazzaro has no positions in stocks, but does own shares in two Pimco Bond Funds: PHDAX and PYMAX.

Tags: breakfast, cereal, kellog