Value and Inflation-Fighting Pricing Power Make this Company a Buy

While many companies have reported trouble in finding workers right now, news of a strike is a different, pre-pandemic sort of labor problem. Yet that’s the case at Kellogg Company (K), where nearly 5 percent of the company workforce has gone on strike.

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  • While a prolonged strike could mean favorite cereal brands getting sold out at grocery stores, shares of the company were slightly up the day the story broke. Yet it does point to the relative value the company is trading at now.

    Shares of the branded food giant are trading at about 16 times forward earnings, a nice discount to the overall market. Shares have traded flat over the past year, even as earnings and revenue have grown slightly.

    The company’s strong brands in the cereal space also allow the firm to pass on the costs of inflation with price increases as needed, making for an attractive investment as long as inflation rates remain high.

    Action to take: Investors may like shares, given the company’s history of dividend growth. Shares currently yield about 3.6 percent.

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  • Shares have been trading in a range for the past few months, with a slight uptrend in place. Traders might be able to nab a decent profit with a trade like the January $67.50 calls. Last going for about $1.45, mid-to-high double-digit returns are likely, and profits can likely be made if a resolution to the company’s labor problem is announced.


    Disclosure: The author of this article has no position in the company mentioned here, but may trade after the next 72 hours. The author receives no compensation from any of the companies mentioned in this article.

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