With food prices, raw costs and inflation all skyrocketing, why is a stock like General Mills just about a point below its 52-week high?
Because this cereal maker is not just any food company, Cramer said. General Mills CEO Ken Powell explained on Friday’s show that, even though the industry is dealing with some of the highest raw costs in recent memory, the company is able to absorb the worst of it through a focus on productivity and passing some of the costs onto consumers through price increases in order to protect margins.
Cereal is a staple of the American diet, Powell said, and the market for cereal is always going to be relatively elastic. So while General Mills is dedicated to keeping its products affordable, investors shouldn’t worry that one day its products and brands will lose share – even if raw costs continue to go higher and food becomes even more expensive.
Powell also spoke on the topic of ethanol, joining other food company CEOs who have railed on this country’s ethanol mandate on Mad Money. “There’s no doubt this is the wrong time for ethanol,” Powell said. “There’s never been a greater demand for food as food.”
General Mills is a stock that Cramer’s been recommending for years, beginning back when he worked at his hedge fund. And now, when it’s hard as ever to compete in the food business, the fact that the stock is near its high just speaks volumes to what kind of company it is, he said.
As far as Cramer is concerned, on any pullbacks, GIS should be bought.
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