I sold Puts on General Mills Inc. (GIS) today. Packaged food manufacturers’ margins are taking a hit from inflation in raw material and packaging costs. Plus, higher supply-chain costs owing to the rise in logistics and freight further remains a drag. Also, increased promotional spending to drive volumes and a tough retail environment continue to hurt profitability. With all these short term problems, I have been tracking several candidates in this group including Mondelēz (MDLZ), Hershey’s (HSY), Conagra Brands’ (CAG), and Kraft Heinz (KHC), but pulled the trigger on General Mills today – just too to cheap to ignore:
- Sold: 10 June 15, 2018 Puts
- Strike Price: $40.00
- *Premium Collected: $750.00
I know I am early to this trade – the entire sector has been going down day in and day out, but if I am forced to buy the 1000 shares, my entry price will be $39.25 per share – almost a 34% discount to General Mill’s Morningstar Fair Value. General Mills is currently paying a 4.61% dividend – and I love their brands: Betty Crocker, Cheerios, Old El Paso, and Pillsbury – just to name a few.
*Excludes transaction costs.
Leave a Reply