You don’t see this too often nowadays but food manufacturer General Mills (GIS) – which reported 3Q22 earnings this morning – is now trading at 52 week highs. To put that in context, yesterday only 13 stocks on the NYSE out of 3,389 closed at 52 week highs. What can we learn from this anomaly?
Most importantly GIS sells consumer staples i.e. necessities. Some of their leadings brands include Cheerios, Haagen Dazs and Yoplait. As I’ve written many times in previous blogs this is where you want to be right now. You want to own companies that sell necessities not luxuries. While consumers will cut back on a new pair of Nike’s or a restaurant dinner they are unlikely to cut back on the stuff GIS sells.
As a result GIS’s organic sales were +10% and currency neutral adjusted EPS +13% in their FY1Q23 ended August 28 and they raised full year guidance. GIS is now expecting full year organic sales of +6-7% (versus +4-5% previously) and constant currency adjusted EPS of +2-5% (versus 0-3% previously).
While I’m not about to chase GIS at 20x forward earnings here it does provide a clear example of the kinds of stocks you want to own right now. No matter how high JPow raises interest rates you’re still going to eat your Wheaties.