2023

January 2023

Buy 75 shares of Kellogg's (K) at $72

Happy New Year! I'm starting 2023 off with another stock pick for my portfolio - Kellogg's.

Kellogg's is a food company primarily producing cereal and snacks - some of their well known brands include Pop Tarts, Rice Krispies, Pringles, Cheez-Its, and Eggo waffles. While most people know Kellogg's for their cereal brands, Kellogg's has branched out to become more than just a cereal company and has a substantial snack and plant-based food business. I've owned shares of Kellogg's in the past but sold it a while ago. However, I think now is an interesting time to get back into Kellogg's.

Kellogg's is in a transition phase right now - the company is planning on spinning off its cereal division and retaining the snacks and plant-based food business in the remaining company by the end of 2023. While the cereal business is doing fine but is slow-growing, this spinoff may be what it needs to be properly valued. Kellogg's has great brands that are beloved by consumers yet it trades at a discount to its peers in consumer staples. 

The balance sheet is ok - the company has about $5 billion in debt and ~$400 million in cash. I'd like to see the balance sheet improve but I'm confident management will take care of that. Returns on equity are impressive - averaging about 25% the past decade. In the turbulent market that we've seen recently, Kellogg's has remained flat overall and I think it's a good place to be while we wait out this correction.