Call it Kraft effects, but yesterday fear created the right conditions to enter in Kellogg (K) stocks for a lot of market players : Value Investors , Dividend Investors and Traders too. Let’s give a brief glimpse about it .
Traders : all in a chart . Feb 22, Kellogg open with a gap down . A chance to exploit for profit.
Value Investor : a mix of value and competitive advantage.
From Morningstar report : “we’re maintaining our wide moat rating for Kellogg, which reflects our confidence surrounding its ability to generate returns above its cost of capital (even under a more bearish set of assumptions) over the next two decades, stemming from both intangible assets and a cost edge. ….we believe Kellogg also maintains a cost edge resulting from the economies of scale in production and distribution across its global distribution network, which has afforded it the ability to invest significant resources behind research, development, and advertising.
We expect this competitive advantage should result in excess economic profits, with returns on invested capital (including goodwill) averaging in the midteens over the length of our explicit forecast,exceeding our 7% weighted average cost of capital for at least the next 20 years.
In line with our contention regarding its competitive positioning, Kellogg has generated returns on invested capital (including goodwill) of 14% on average, double our 7% cost of capital estimate, over the past 10 years; they have never fallen below 9%. We expect this performance to continue, projecting a similar level of returns each year on average over the next five years.our 7% weighted average cost of capital for at least the next 20 years.”
Valuation : Current p/e: 14,81 ; Five Years p/e: 31,69 ; S&P 500 Shiller p/e 21,41 ; Forward p/e 14,10
Dividend Investors : a good chance for income seekers.
Dividend Yield: 3,88% . Dividend Yield – 5 Years Average : 2,97%. Dividend Growth : 14 Years . Payout : 57,44%
This is an excellent quality company with strong fundamentals trading at discount and surely its competitive advantage will tend to last in the long period.
Is it time to be greedy ?