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With American budgets pinched by the recession, eating out is "out," and eating in is "in," which is good news for General Mills (GIS), and that's a major reason I'm reiterating my buy rating for the company's shares, first recommended on April 8, 2009, at a price of $50.81. If you bought GIS in April, you're up more than 40%.
More U.S. consumers will continue to eat an increasing number of meals at home in 2010.
Solid brands (Cheerios, Wheaties, Lucky Charms, Total, and Chex), good cash flow, and room for margin expansion on new manufacturing efficiencies flesh-out the positive story. The First Call FY2010/FY2011 EPS estimates for GIS are $4.60 to $4.99. That $4.99 FY2011 EPS estimate will likely prove to be low.
Technically, General Mills' stock chart is beautiful -- a staircase -- about as strong as a chart can look, with minor, constructive pull-backs, and a price that continually stays above the 50-day moving average -- a sign that institutional investors are adding to/establishing GIS positions. According to my analysis, GIS is headed much higher.
2010 Outlook: General Mills is a long-term play, but if you're looking to sell GIS within the year, take your profits after it rises to $83-84 if it fails to rise above $85.
Stock Analysis: General Mills is a moderate-risk stock. If you've already purchased the company's shares, hold them. If not, consider buying a 25% position in GIS 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 GIS position before March 2010. Sell/stop loss if you were to buy shares in this company: $47.
Disclosure: Lazzaro has no positions in stocks, but does own shares in two Pimco Bond Funds: PHDAX and PYMAX.
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