Food giant General Mills is giving food activists something to cheer about: The company is no longer using genetically modified organisms (GMOs) in Cheerios breakfast cereals. And, that could be great for the long-term health of General Mills, says one strategist.
To be sure, General Mills still supports the use of GMOs but it is taking notice of the public's uneasiness. In a blog post, Tom Forsythe, vice president of Global Communications for General Mills, explains that the company isn't backing away from GMOs in Cheerios because health reasons. Instead, it's about, well, sales. Forsythe writes:
"Why change anything at all? It's simple. We did it because we think consumers may embrace it".
According to CNBC contributor Gina Sanchez, founder of Chantico Global, this latest move by General Mills with Cheerios is part of the company's broader strategy.
"If you look at where Cheerios has been putting their efforts in the last few years, it's actually in things like this that have perceptions," says Sanchez. "Particularly, in the gluten-free market which is expected to grow 10% all the way through 2018."
Sanchez says that while General Mills is looking to expand its gluten-free market share, its major competitors aren't there to found.
"In aggregate, these kinds of moves are going to be very beneficial for a company that already has pretty good operating margins," says Sanchez. "I think that this stock is undervalued already. This is yet just another way to increase their growth in revenues."
However, the company's stock price has been stagnant over the last several months. Shares of General Mills had returns of over 23% for 2013, but much of that move happened in the first four months of that year.
Jeff Tomasulo, managing partner at Belpointe Alternative Investments, sees General Mills' stock as staying inside a tight trading range between $47.50 and $52 for much of 2013. A key indicator Tomasulo is the stock's 20-day moving average.
"Right now it's trading below that 20-day moving average," says Tomasulo. "What the 20-day moving average is showing me is there is a short-term downtrend."
Tomasulo says that once the stock breaks through the $47.50 level, longs should exit their positions. He also says $47.50 is a good place to take on a short position in the stock.
However, Tomasulo believes that should General Mills start seeing results in its emphasis on such things as gluten-free products, the stock could become a buy.
"If that starts to take form in their bottom line, then we could see a move above that $52 level," says Tomasulo. "And, that would be a buy."
To see the rest of the analysis by Sanchez and Tomasulo on General Mills, watch the video above.
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