General Mills (GIS) is another strong consumer stock, according to Link. She says its strengths, like P&G, include a strong management team. The company has a Holistic Margin Management program that overseas efficiencies or productivity initiatives that will save General Mills $1 billion in costs for the next three years, Link said.
Furthermore, General Mills has "superior brands and unusually cheap valuation -- the best in the industry and has always commanded a premium multiple given its growth, but now trades in line with peers." Link notes that Kellogg, General Mills' biggest competitor, is a "broken story and mismanaged."
Link also writes that Altria is experiencing easy comparisons given its "horrendous" volumes in 2009. Furthermore, limited government and state tax increase has helped the company improve in volume, pricing and market share. "Plus, they have the added benefit from the UST (U.S. Smokeless Tobacco) acquisition that they bought in 2008 and plowed a tremendous amount of money into rebranding or repositioning and are now just beginning to see huge volume increases." Altria purchased U.S. Smokeless Tobacco for growth "and it is now starting to work."
Link said the McDonald's (MCD) is "a true winner from trade down." She points out the company's implantation of strategies, including new products in the beverages and breakfast category, remodeling stores, adding more drive-throughs and extending hours. Furthemore, McDonald's reported "huge" comps last week with upside in all the regions where the company operates. "Valuation is compelling and this management has executed on its new strategy perfectly."Link has generally avoided retail stocks. "Costco (COST) was the only one that I liked but even that one has been held back despite great comps because of the weak macro. "I really don't see many that are differentiated and the pricing is so severe. Plenty are cheap, but then again -- so many stocks are." UBS analyst Nik Modi said in a major stock market pullback scenario -- "in that environment -- given the dividend yields of these companies, you would see relative outperformance like you did in the '08 period ... but these stocks going up in absolute terms may not be as clear." He said that most likely, they would go down less.
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