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.

 

 

In the past few years Israel has been moving more towards a cashless society in its efforts to make it more difficult for criminals to function, and to prevent money laundering. The entire Western world is moving in that direction, and Israel has been going with it. A couple of years ago Israel passed a law to limit the size of business transactions allowed to be conducted with cash. Israel wants to be able to keep track of the flow of money, which it cannot do with cash.

The community of Mea She'arim (or parts of it) is one of those that has been in conflict with the police in recent days over the regulations form the Ministry of Health. The police go in to break up illegal gatherings and minyanim, and the fights break out, arrests and fines, police leave, and then the cycle starts again. This is also true in parts of Bnei Braq as well, and RBS B, but right now let's focus on Mea She'arim.

The :shtieblach of Mea She'arim is a good example of the innovative and adaptive capabilities and of the wit of the Yerushalmi head.

The police closed them down, shut the shul. In its place the yerushalmim there decided instead to open a kiosk, a makolet, selling food.

A makolet is allowed to have 4 people in line at each cash register, standing 2 meters apart, plus the cashiers.

So they opened a makolet in the place of the shul, and set up two "cashiers", allowing 4 people in each line. That is a total of ten people. And then they daven while in line for the cashier (who are also davening as part of the minyan).



It is a cute attempt to try to get around the rules. I doubt it will hold the police at bay for long.

The biggest problems I see with it:
1. are you allowed to use a shul as a makolet?
2. They are now running an [almost definitely] unlicensed business and can be shut down for that instead.
3. They can almost definitely all be arrested for tax evasion and all those types of crimes for not filing taxes, not recording transactions and all the rest of the fraud crimes they are committing.

Cute, but I doubt it will last long.

A Guest Post by Dr Harold Goldmeier



Billions of dollars are beginning to flow into Israel’s coffers. What is the plan for spending the transformative treasure? “Show me the money” before it is swallowed by the politicians and siphoned off by the oligarchy.

I have some suggestions.

Houston-based Noble Energy and partner, Tel Aviv’s insider-controlled Delek Group, project Leviathan gas sales and profits to be “the biggest exploration success in its history.” For example, the Israel Electric Corporation allegedly secretly passed on $1.3B in compensation from a gas sale to Egypt. The revenues and profits allegedly ended into Delek and Noble accounts in exchange for nothing. And nothing was made public. The utility-buying consumers got no money or relief.

Here’s what the powerful are slobbering over.

· The bulk of Leviathan gas is for export not domestic use. It is initially going to Egypt, Cyprus, Jordan, and Greece. A pipeline is planned to sell natural gas in Europe. The government doesn’t talk about showing us the money.

· Liquefied Natural Gas will be shipped by seagoing vessels to Asia. Show me the money.

· Gas sales to Egypt are estimated to be worth $15B over ten years. Another deal is said to reach $7.5B. Where is the money?

· Revenue over 15 years from gas contracted for sale to Jordan is worth $500M. Where’s the check?

Israel established the Israeli Citizens’ Fund in 2014. It is known in finance as a sovereign wealth fund. But it is empty. A Globes, December 4, 2019, headline says it all, “Israel’s sovereign wealth fund: No money, no management.”


Israel is beset by a stalled government. An intimidated bureaucracy with a rare whistleblower. A Knesset neither humbled nor shamed by a slew of investigations and indictments of Ministers, their quest for personal immunity from prosecution for fraud and bribery, is the bane of existence for equitable distribution of gas-sourced revenues and profits.
Israel ought to learn from the Dutch and Alaska. They enjoyed their new found wealth from commodity natural resources. Things went horribly wrong for the Dutch but Alaskans are thriving. In 1977, Dutch new-found natural gas exports soared. Unemployment also soared five-fold. Gas extraction is not labor-intensive limiting job creation. Corporate investment tumbled. Foreign demand for Dutch currency made it too strong shaving the competitiveness for Dutch products in international markets. Israel’s economy eight decades later is not too dissimilar from “Dutch disease” as the Economist coined the condition.

Israel’s economy is now trailing that of other developed countries. Private capital investment is falling. Productivity lags. Foreign corporate investment represents, according to the Israel Advanced Technology Industries, GKH Law and IVC Research Center, the “backbone” (18%) of direct taxation in Israel. Israel’s organic growth is the slowest in four years. Israel’s budget deficit is set at 3.7%, excessively greater than the 2.9% the government targeted. The shekel is bounding ahead of the dollar and pound, so the exchange rate suffers and the cost of living is rising fast.


Yet eligible residents of Alaska get direct benefits since their government established two sovereign wealth funds to manage the largesse from the oil and gas industry since 1982. The Alaska Oil and Gas Association reports on one benefit, “In 2018, every qualified Alaskan received a dividend of $1,600.”


Here are some suggestions about what Israel might do with the money.

· Give it back in dividends to the people. Cut the oppressive taxes. The economy will soar. Lower the high cost of living in Israel driving olim back home and citizens to live and work overseas. Send eligible residents a dividend check from the gas sales

· Improve sustainability programs. Kudos to the Israel Electric Corporation that signed a $700M contract to buy natural gas over two years from the Leviathan site. IEC is switching away from polluting coal. Now, lower electricity rates. That act will translate to more cash in consumers’ pockets and never underestimate an Israeli to spend money in their pockets. Retailers, food producers and manufacturers will have more money too, and create more jobs

· Inter alia, build more hospitals so my wife and other patients need not ever again spend 11 hours on a gurney parked in the hallway of an emergency room, raise nurse salaries and educate more doctors and other medical delivery personnel

· Repair the fraying social safety net and expand programs like Bat Melech that protect the lives of women and children suffering domestic abuse

· Connect consumers to the gas distribution network, as the State Controller warned in 2017 and replace electric-powered water heaters. Goodbye to the notorious roof-top dood (Hebrew). Give tax credits and free loans for installing natural gas hot water boilers in every building.

A conservation program freshwater is critical according to the Ministry of National Infrastructure, Energy and Water. There is no time or water to waste despite the bountiful rains this year.

My plumber friend, Ashley Coleman, tells us the standard dood supplies 150 liters of hot water. That is 25 minutes of showering time per dood-full, not accounting for my teenage granddaughters. It takes about two hours of electricity to heat a dood-full of water in the sun-diminished winter. Even in the summer the solar heated dood only saves five-percent of electricity. Israelis notoriously waste hours of electricity forgetting to flip off the dood switch.

Gas-fired hot water boilers heat water fast and automatically turn-off with a thermostat. Moreover, a resident must let gallons of potable, cold, water run-off down the drain from the roof top dood until the hot water hits. This infrastructure is from pioneer days and its planned continuation seems ridiculous in an age of high tech and bountiful pools of natural gas.

The natural gas finds and mining are Israel’s Hallelujah moment. Instead of allowing those who have plenty to have more, give back to those who have little and find their money always being taken away.

A short while ago a law was proposed to minimize the use of cash in the market, thus giving the authorities more control over issues like money laundering and the like. This is a trend happening in governments around the world.

That law proposal passed last night.

cash is, officially, no longer king.

The law will go into effect on January 1, 2019, and it will apply equally to open checks 6 months later on June 1, 2019, as these checks have many similarities to cash.

Some of the details of the new law:

• Breaking the new law and using cash or check above the limitations will be forgiven for the first 9 months after the law goes into effect, to give the public time to acclimate to the new rules
• any transaction worth more than 11,000nis for a business or 50,000nis for private - cannot be paid in cash, even partially.
• using cash to pay salaries, donations, gifts or loans: if the transaction is worth more than 11,000nis with no family relation, or 50,000nis with family relation, cash is out, even for part of the arrangement.
• open checks and third party checks are not to be used. The bank will not accept checks that are open, or third party checks with sums greater than 10,000nis that have already been transferred through more than one party unless all the names and id numbers are listed on the check.
• businesses violating the law will suffer financial sanctions. Private individuals will receive criminal fines.

The law passed its final readings in Knesset 49-9.
source: Haredim10

I am not sure how they will enforce this, at least at a private level. Businesses seem easier, via the tax authorities and audits, but private donations or gifts can easily be split up into multiple donations, each being under the limit. Maybe if they discover  multiple donations or gifts at just under 11k within a certain time frame they will consider it a violation.

Logging into my bank account online recently has the following message popping up warning me of  upcoming changes in the bank..


The warning says that as of March 14, 2018, my branch (Hapoalim in RBS) will be converted to a branch  holding no cash and no clerk services. From that date and on, all relevant services will be provided via the self-service machines. Other direct channels to the bank, such as via Internet, telephone, and app, will continue to function and be available. When necessary, bank branch 692 (the central Bet Shemesh branch located in downtown Bet Shemesh) will be available for all clerical services.

This is a trend happening in all the bank chains all over Israel. They are closing and/or merging branches in order to consolidate and save money.

Personally, I hate going into the bank and avoid it as much as possible. I use the machines to deposit checks,  as I get a lot of these through my business, and I use the online services. The only time I go into the bank is if I am sent a notice that I need to come in and pick up a problematic check that I deposited, or if they tell me I need to come in to sign something. Once every few years I also need to renew my credit cards.

The biggest problem I see with this is that half the times the various self-service machines are not functioning properly. Currently, they can be fixed or rebooted relatively quickly (not including Saturday nights and Sundays when the branch is closed), as I or someone else can go into the bank and let them know, but with no actual bank behind it with real people talking to customers, I can see it taking longer to get the machines fixed. Maybe they will keep a small branch open with some services still provided by clerks, such as mortgage services and the like, and that will keep bank people nearby.

Additionally, with everyone needing personal service in the entire city going to one branch, that place will be packed and will be impossible to use.

Another point is that closing a branch in lieu of online services in a largely Haredi neighborhood seems like a bad idea. While many/most people do have Internet and app access, many do not and they need the in-bank services for a lot of what they do.

I get why they are doing this but I don't like it, even though I don't like going into the bank anyway.

UPDATE: to clarify, the bank branch is not closing but they are putting an end to cash services. There will be no tellers for deposits and withdrawals. Other clerks and the various services they provide will still be functioning as they have until now

I don't really understand how this will work but Minister of Transportation Yisrael Katz announced a reform of the public transportation system. Katz says that the shared taxi system (moniyot sheirut - where a taxi van fills up with ten passengers that share the ride from city to city. in the Gush Dan area there are also such shared taxis that drive along the local bus routes picking up and letting off passengers along the route at a price similar to that of the bus) will be added to the public transportation system and passengers will be able to use their "rav kav" cards in taxis as well, and it will work on Shabbos as well.

According to Katz this will make public transportation cheaper and will also prevent the shared taxi system form closing down, as has recently been threatened by a decrease in business. These shared taxis will be able to work on Shabbos, and their "weekend" business will grow, the there will be no use of the rav kav on Shabbos - passengers will have to pay cash. According to Katz, not allowing use of the rav kav on Shabbos will avoid breaking the status quo.
source: Kipa and Kikar

I guess technically it is not a breech in the status quo because of the lack of use of the rav kav, but it seems to me to only be cosmetic, as really it is the government allowing and encouraging more public transportation. If all they care about is how it looks cosmetically, than I guess this will not be a problem.

I've never understood why waiters and waitresses do not get paid salaries, and have to survive on tips instead. Why are they different than any other employee in a western country?

Obviously a salary would also come out of the customer's pockets, in the form of higher prices, but overall I'd probably be happy to know how much my dinner actually costs and not have to decide on a tip when I am finished eating. Regardless of me, the customer, waiters and waitresses need to be treated properly as employees, with minimum wage guaranteed, with benefits, and with the responsibility of paying taxes. Like any other employee.

Another thing I always wondered about is cleaning ladies. Cleaning ladies is another industry that is mostly a cash business. They do not pay taxes, they do not get benefits. Yet, with cleaning ladies it has become well known that you are actually obligated to be paying them bituach leumi money in addition to the salary you pay them. Even if they do not bother filing taxes and reporting their income, they can, and sometimes do, sue later for the bituach leumi money. They should be salaried employees or registered freelances. They should have to pay taxes on their income. They should have to pay their own bituach leumi, just like any registered freelancer does. Or they should be employees, with taxes deducted, with minimum wage, with benefits, with bituach leumi, and whatever else it entails.

MK Dov Henin (Hadash) has proposed a law that would at least deal with the waiters and waitresses. Henin's law would require restaurant owners to pay waiters and waitresses [at least] minimum wage, and not count the tips as or towards their salary.

Studies show that waiters and waitresses generally get paid less than minimum wage and receive no social benefits.
source: Jpost

It's a good start. Pay the waiters. Pay the waitresses. Treat them like human beings working for a living.

Posted on behalf of a group of concerned residents

• If it bothers you, just don’t buy them, its really that simple.
• Women are so sexualized in the world that we must do the opposite:
• A woman’s worth, her beauty is internal.
• Achdus! Why must you start up?
• Its always been this way
• We are telling our daughters that their externals are not important.
• Preserving women’s privacy does not prevent them from having a major influence in our lives.
• It’s our right

We desperately hope not. It certainly isn't who we are meant to be.