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Another name that's benefitted hugely from an emphasis on consumer-driven stocks is
General Mills (
GIS) -- shares of the cereal maker have rallied nearly 23% since the first trading day of 2013. I use the term "cereal maker" lightly; while General Mills is probably best known for its breakfast cereal brands -- which include Cheerios, Chex and Wheaties -- the firm owns a broad portfolio of food labels, from Yoplait yogurt to Pillsbury baked goods and Haagen-Dasz ice cream.
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That portfolio diversification helps smooth out any hiccups in consumer tastes. And in recent years, those tastes have focused on convenience. By ramping up ready-to-eat offerings (such as cereal and soup), the firm bolsters the strength of its brand. Consumers are less likely to move to store brands for products that they don't prepare. As GIS continues to spend money developing new products, it should continue to reap some significant rewards.
While GIS carries a fair amount of leverage on its balance sheet, its levels aren't out of whack for a capital-intense food producer. More important, those debt obligations are more than covered by cash flows -- with enough left over to fund a 3% dividend yield. Investors looking for a defensive play on the food business could do worse than General Mills.