Israel,
General Mills, and Your Money
A Guest Post by Dr Harold Goldmeier
This summary article is about business in Israel. Read
the full article here: https://www.gurufocus.com/news/1832439/why-general-mills-is-a-fulfilling-investment. People ask me my opinion when I speak to community and business
groups how they can best help Israel and participate in the growth of the
startup nation? Always consult your broker, lawyer, and accountant before
making investments. Visit GuruFocus.com for the original article.
Disclaimer: Please
be advised that neither the author or Life in Israel, its affiliates, its
employees or agents accept liability for any errors, omissions or
damages caused by this communication or its attachments, or which may
otherwise arise as a result of this communication transmission. Dr. Harold
Goldmeier, Business Teacher and Consultant
·
General Mills says ending a joint
manufacturing venture in Israel was a business decision, not a boycott. A slew
of products is in stores across the country.
·
General Mills could be a value opportunity despite trading near
its 52-week high.
·
The nature of the business and the hallmark dividend could
provide stability amid uncertainty.
Slow,
steady, safe
Not every decision is political though it seems that way
because of Israelis’ existential angst.
A company representative emphatically claims, “We
continue to sell our products in
Israel and look forward to continuing to serve Israeli
consumers with our other brand.” Nor is it wise for investors to let politics sway
investment decisions. A slew
of GIS products is in stores across the country.
General
Mills Inc. (GIS, Financial)
might seem a bit richly valued now that the stock trades near its 52-week high.
Yet, in my opinion, General Mills has the potential rise another 10% higher. By
the end of the new fiscal year, my price target for this stock is in the $82 to
$85 range. This is because of the combination of the food industry's defensive
nature and General Mills' solid dividend.
Food
industry stocks are one of the best consumer defensive investments in a volatile
market. The S&P Food and Beverage Select Industry Index was steady from the
pandemic outbreak through this month.
General
Mills in particular did well. General Mills' shares are up 22.5% over the last
12 months. They rose 35.5% in the past five years. The price-earnings ratio of
18.35 is lower than the average of 21 for its broader industry, although it is
higher than the average of 15 in the food products group. Its Beta rating is
0.15. Short interest is a scant 2.22%.
Inflation
and any remaining bumps in the supply chain might cause a 1% to 2% slip in
profit in the new fiscal year’s first and second quarters. Anticipated sales
increases of 4% to 5% should offset pressures on margins and profits.
Great
company packaging
General
Mills manufactures, markets and distributes name brands of baking products,
cereals, dough and pastries, fruit, ice cream, prepared meals, organic and
natural foods, pet foods and pizza. Its products sell in over 100 countries
across six continents.
Cereals
are the core business. Fruit bars, health bars and snacks are among its
fastest-growing targeted segments. The company points out its heat and eat
breakfast sandwiches as fast growers for their convenience and competition with
fast-food restaurants.
Finances
are stable
In
May, the company reported that its diluted earnings per share for the quarter
increased 98%, or 23% in constant currency, to $1.12. Net sales increased 5%
for the year. Organic sales for the quarter were 13% higher. Operating profit
for the full fiscal year was up 11%. Fiscal fourth quarter operating profit
rose 85% to $1 billion. Operating cash flow grew 11%.
The
pet foods segment of General Mills had 20% to 30% sales growth, compounded by
the July 2021 purchase of pet treat brands. In the fourth quarter, net pet food
sales grew 37% year-over-year to $610 million.
General
Mills has historically used debt to finance growth and pay solid dividends. Its
debt-to-equity ratio is 1.22. The company has been reducing debt, but with its
enormous market cap, it is unlikely to have trouble borrowing money. The debt
has been falling for five consecutive years.
Valuation
The
GF Score for General Mills is 78 out of 100. Though highly profitable (8/10),
the value rank is minimal (3/10). Momentum is moderate (6/10). Its growth rank
just 6/10.
Corporate
insiders sold almost one million shares as the price increased. Meanwhile,
hedge funds increased their holdings in each of the last three quarters. They
added 385.7 thousand shares in the fourth quarter alone.
General
Mills pays an attractive 2.78% forward dividend yield, which I believe adds
greatly to the value proposition.
Commitment
to shareholders
I
like General Mills as an investment opportunity.
The company’s products are sold almost everywhere in Israel. It
also commits to business sustainability making its packaging
eco-friendly and targeting zero waste and carbon footprint.
GIS has upward potential, pays a good dividend, and is
financially sound.
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